When electricity was first popularized at the beginning of the 20th century, there was a huge wave of factories that replaced their steam engines with electrical engines in an effort to increase productivity and modernize operations. However, the initial productivity gains from the electrification were barely noticeable – a phenomenon known in the economics literature as the productivity paradox and popularized by Stanford economist Paul David.
When researchers tried to find out why, they found that the electrification of factories basically involved the replacement of steam engines and pipes with dynamos and wires while everything else remained the same. It took a long time for industrial engineers to realize that the beauty of electricity didn’t rely only on the fact that it was a cheaper, more powerful and dependable source of energy but also that it allowed them to completely rethink the manufacturing process. Industrial engineers and plant managers eventually realized that thanks to electricity they now could move machines in ways that allowed workers to work more efficiently, change the layout of the factory or create an assembly line.
And it was then and only then, through the combination of new technologies and better processes, that productivity finally increased.
We at the Integration & Trade Sector face a similar challenge. During the initial discussions about the scope and needs of a new trade modernization project, a large portion of the dialogue focuses on the infrastructure and technology without fully reflecting on the changes in processes that will be required.
Just like we saw during the industrial electrification, to get the most out of your IT investment, it is imperative to also modernize the processes that determine how things are actually done.
That is precisely why our trade modernization projects usually begin with a thorough business process reengineering (BPR). Exporting and, especially, importing goods in developing countries is a feat of formidable complexity. Traders must comply with a myriad of redundant government regulations issued by different government agencies characterized by the lack of coordination and, in many occasions, subject to the discretionality of the officers.
So what have we learned from the reengineering and implementation of new processes? Although every BPR is different, here are 7 lessons learned:
Very few people understand the whole process
When conducting the mapping and reengineering of processes, we have found that very few people understand the end-to-end process. Government officials may understand their own piece but not how the entire process works from beginning to end. In trade, this is particularly problematic given the multitude of government agencies involved in the export-import process. Contrary to popular belief, customs administrations are only one administration, although an important one, involved in the import-export process. As a matter of fact, data from the World Bank indicates that customs administrations are only responsible for ⅓ of the delays at the border, and United Nations estimates that the average transaction requires 40 documents and 200 data elements (60-70% of which are re-entered at least once). Therefore, it is critically important to have a holistic approach and a clear understanding of the whole process so that the intervention can eliminate all bottlenecks and not just those on any given administration.
Blame the process, not the people
When you focus on a business process, it appears less threatening than focusing on the employees who do the work. Identifying bottlenecks and cumbersome bureaucracy and linking them to the process instead of to particular employees leads to less threatening and more palatable solutions.
The changes in processes must not be constrained by what the current regulatory framework allows, but instead follow international best practices. This will inevitably require some sort of automation, digitalization of paper forms, data exchange, electronic payments and signatures, and thus substantial changes in the regulatory environment. Therefore, a good BPR must also indicate the changes needed in terms of legislation and regulation in each administration.
If you want to go fast, go alone. If you want to go far, go together
Process reengineering affects the entire ecosystem of all administrations involved, that’s why it is of paramount importance that the whole organization embraces the BPR as their own initiative. Although there is not a magic recipe for this, a good way to help developing a sense of ownership are interactive and regular meetings across all levels of the administration. These meetings, properly executed, represent a great opportunity to gain supporters and also involve everyone in the process asking for recommendations and suggestions. Similarly, an incremental implementation of the changes and a detailed explanation of why they’re needed not only give people peace of mind but it helps minimize the possibility of rumors that may undermine the process. The employee must be an active participant in the process and not a witness of it. Real change happens from the inside and it is naive to believe that a consultant or consulting firm is going to bring about structural changes without the support of the workforce.
Anticipate the impact and develop tailor made solutions
Many government agencies derive their revenue, all or in part, from paper-based processes. Therefore automation essentially kills their main source of funding (and power). A good BPR will anticipate these objections and develop a well thought out solution with all parties involved. Similarly, some government agencies are more mature than others in terms of IT use, so it is essential to identify at an early stage the agencies that will require more financial support and training and budget accordingly.
The cost of inaction is key
Identifying the weaknesses and bottlenecks of the current processes and recommending new ones is not enough to prompt organizations to take action. Ideally, a good BPR should not only highlight the potential gains from the implementation of the new processes, but also estimate the cost and lost revenue that the status quo is causing. For example, in a recent BPR we detected significant loopholes in the import process of luxury vehicles, oil and dry bulk cargo that were costing the government millions in lost revenue. I cannot emphasize enough this point. Humans are hardwired to be risk averse and research has proven time and time again that we feel the pain of loss more acutely than we feel the pleasure of gain (it’s what behavioral economists and psychologists call loss aversion). Bottom line: when the cost of inaction is higher than the cost of action, people take action.
Excellence is a habit, not an act
The BPR must not be seen as a one-time activity, but as a new philosophy of doing things. International trade changes constantly and that is why it is important to develop a culture of continuous improvement where employees are incentivized to constantly refine processes.
Cutting a jungle path through thousands of pages of overgrown and, in some cases, outdated government regulations is a tedious and titanic effort. If looked at individually, every inefficient process might seem benign and trivial at first sight, and therefore it is no wonder that they are frequently overlooked. Plus it is always difficult to fight against the inertia of the past. However, we must not underestimate the impact of seemingly small things.
Furthermore, policy makers must analyze the impact of processes as a whole, and not just individually or by administration. It’s only through a careful and methodical analysis of all processes when we are actually able to appreciate the magnitude of the problem, and the cumulative effect of the process ecosystem. As the proverb goes, no snowflake in an avalanche ever feels responsible.
Finally, governments and nations cannot choose their natural resources or their neighbors. But they can definitely choose how they conduct businesses and interact with the civil society, private sector and the rest of the world. Every government has a moral responsibility to design and provide the best services possible to their citizens no matter how trivial they may seem. As John F. Kennedy once said, not everybody is in a position to do extraordinary things, but we can all do ordinary things in extraordinary ways.
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John Langer says
Excellent food for thought. I would also highlight the importance of involving the private sector and port operators during the process.