Failing business process change projects substantially impact financial performance of UK business

New EIU study commissioned by Logica Management Consulting identifies winners and losers in business process change and outlines best practice guide

• Companies surveyed in the UK losing £1.7 billion a year
• One third of business process changes fall short of expected benefits
• One fifth of businesses do not measure change management performance

Nearly one third of business process change projects fail to improve process or corporate performance, giving rise to ineffective change management projects, according to a new study from Logica Management Consulting and the Economist Intelligence Unit (EIU).  In particular the UK companies surveyed are losing £1.7 billion a year, with global companies loosing £7.8 billion a year. With many companies about to make tough financial decisions in response to the looming recession in the UK, Logica is urging companies to follow best practice to ensure value and delivery for both businesses and consumers during the current period of consolidation.

Although the key drivers for change management, as described by respondents, include improving financial performance (over one third), improving customer focus (45%) and reacting to competitive pressures (32%), in practice a worrying performance gap means this is unlikely to actually happen.  Investment in business process change is significant in the UK, with more than two thirds (70%) of organisations spending between one and six per cent of their revenue on projects. However almost one fifth (18%) of organisations do not assess the achievement of specific goals against the original business case, such as ROI, with over a third of organisation (35%) abandoning a major change management project in the last three years.

James Campbell, management consultant at Logica Management Consulting explained; “The spate of mergers and takeovers in the financial sector for example, over recent months has led to wide speculation about companies making redundancies in order to achieve savings.  The key to delivering such savings, however, will be a complex transformation programme which will require significant investment in both people and technology.  Such a programme of change will likely have several key elements, including alignment of business processes and supporting technology; real estate rationalisation and the disposal of non core businesses.  Each of these elements brings both challenges and opportunities.”

Logica Management Consulting identified high performers, or winners, as those 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-departmental projects than losers.  They are also more proactive when planning change projects, don’t wait for problems to arise 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.

High performers also 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 (42%) and lack of resources (41%).

James Campbell continued: “The recent spate of mergers and acquisitions presents a great opportunity to bin legacy processes and technologies that restrict an organisation’s ability to respond to customer needs and to further develop an innovative approach.  This will lead to cost savings and help organisations to be well positioned for future growth.”

Winners also value IT in change projects, with ninety five per cent of respondents agreed that IT played an important role.

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 UK executives include the need for integration across locations and realising the benefits of earlier initiatives, including shared services centres and outsourcing.

You can find the full report here: http://www.logica.co.uk/securing+the+value+of+business+change/400013767

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). More information is available at www.logica.com.

About the research 
The 2008 Securing the value of Business Change report outlines findings from 380 executives in Western Europe, and assesses how companies evaluate the impact of business process change projects on process as well as corporate performance.  The report was jointly developed by Logica Management Consulting and the Economist Intelligence Unit.

The sample of the survey was multi industry: over one-quarter of executives in the survey (27%) were from the financial services sector, 11% from professional services firms and 16% from telecommunications companies and IT and technology companies. Healthcare, pharmaceuticals and biotechnology, manufacturing and other major business sectors were also represented.

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