Failing business process change projects substantially impact financial performance of European business
New EIU study commissioned by Logica Management Consulting identifies winners and losers in business process change and outlines best practice guide
- 30 per cent of business process change projects fall short of expected benefits
- Companies surveyed losing 10 billion Euros a year
On average thirty percent of European business process change projects fall short of expected benefits, according to a new study from Logica Management Consulting and The Economist Intelligence Unit (EIU). The Securing the value of business process change report outlines findings from 380 executives across different industries in Western Europe and assesses how companies evaluate the impact of business process change projects on process as well as corporate performance.
Investment in business process change is significant across Europe, with more than three quarters of organisations spending between 1 and 6 per cent of their revenue on such projects. The impact of business process change is also substantial: 66 per cent of European organisations point out that one of the top drivers for implementing business process change is to improve financial performance. However, in practice, the change projects do not always achieve this. Business process change initiatives often fail to improve process performance or corporate performance. Amongst the companies that have been surveyed approximately 10 billion Euros per year are being wasted on ineffective business process change projects.
Leon Manet, international manager, Logica Management Consulting, explained: “We set out to explore the success and failure factors behind business process change initiatives and measured the financial performance of companies that adopt best practice when managing change projects. Based on the difference in approach between high and low performers we have identified critical success factors and a list of do’s and don’ts for successful business process change. We encourage companies to leverage the findings of this report to ensure that they reduce wasted investment in business change programmes, which are now an everyday part of business life.
“Especially in the current economic climate with the looming threat of recession in many countries there is a strong need for change, but business process change management projects have to deliver the expected business benefits.”
Logica Management Consulting identified high performers, or winners, as those companies whose Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) had grown 20 per cent or more over the past three years. Low performers, or losers, were those whose EBITDA had either stayed the same or fallen over the past three years.
A key finding from the report is that winners tend to be more ambitious when planning change projects. Winners are much more likely to run cross-regional, cross-department projects than losers. Also, they are more proactive when planning change projects, finds the report. They don’t wait for problems such as customer complaints or lost market share before implementing change reactively, but plan for change in order to improve business performance and involve customers and partners in that planning.
The main obstacles to effective business process change are:
• Pressures of day to day business (48 per cent)
• Lack of dedicated resources (38 per cent)
• Lack of alignment between functions (38 per cent)
• Lack of support from senior management (15 per cent)
• Poor planning (16 per cent)
• Lack of necessary IT/ infrastructure/applications (22 per cent)
• Lack of expertise in business process design and / or change management (21 per cent)
Winners and losers handle these factors very differently. Winners mention the pressures of day to day business far more than losers and winners perceive this to be a major complicating factor. Consequently high performers put more emphasis on treating change as a distinct project with its own budget, instead of attempting to manage change as part of day to day business. Such a simple step serves to counterbalance the key obstacles to successful change, namely pressure from everyday business and lack of resources.
Winners also value IT in change projects. Almost two thirds (62 per cent) said that IT played an important role, compared to 51 per cent of low performers. And successful changers have a more open relationship with customers and partners than low performers (81 versus 76 per cent in terms of relationship with customers and 88% versus 80% in terms of relationship with partners).
The report further states that the top three triggers for business process change over the past three years have been the introduction of new technology, outsourcing and integration over different regions. Future challenges for European executives include the need for integration across locations and realising the benefits of earlier initiatives, including shared services centres and outsourcing.
At a strategic level, important drivers behind business process change initiatives are financial performance (in the top three factors of 66 per cent of companies), improving customer focus (38 per cent), following best practice (34 per cent) and reacting to competitive pressures (28 per cent).
NOTES TO EDITORS
About Logica
Logica is a leading IT and business services company, employing 39,000 people across 36 countries. It provides business consulting, systems integration, and IT and business process outsourcing services. Logica Management Consulting is the consulting division of the Logica Group with a network of 2,500 consultants located throughout the main countries of Europe Logica works closely with its customers to release their potential - enabling change that increases their efficiency, accelerates growth and manages risk. It applies its deep industry knowledge, technical excellence and global delivery expertise to help its customers build leadership positions in their markets. Logica is listed on both the London Stock Exchange and Euronext (Amsterdam) (LSE: LOG; Euronext: LOG). Find out more..
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