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Mass production vs Customer Value Enterprise® real demand environments

Comparing the processes of a mass-production environment with those found in a Customer Value Enterprise® is a revealing exercise.

In mass-production, the intent is to maximise all assets and capabilities: none should be idle and all should be working continuously. More so, that driving focus also determines management actions.

Truly, maximising production does make logical sense – but only if there is demand for the product. If not, the business needs to scale back production.

In the Customer Value Enterprise® world, however, a business produces only in response to known demand It doesn’t build up a ‘just in case’ inventory because such products may not be needed, resources are wasted and storage costs increase.

Regardless, North American mass-production enterprises are often driven by production forecasts: output is generated in the expectation that all products will be consumed.

Many such companies are now moving to ‘build to order’ – that is, ‘on demand’. The principles of operation between these two approaches are very different.

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In the ‘on demand’ world it is acceptable to keep some assets idle, to accept idle costs in exchange for reductions in inventory, storage costs, and losses from discounting over-produced products.

In the  Customer Value Enterprise® ‘on demand’ world, even idle-time costs can be recovered if the organisation uses the time to improve and optimise the value chain and in doing so, reduce the cost of production still further while increasing quality.

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Moving business to Customer Value Principles of tomorrow

Customers face an inconsistent mix of automated telephone systems, technology, and personal contact.

Currently the personal contact part of the equation is diminished by out-dated management systems making it difficult for staff to provide a genuinely customer-focused service.

As customers are moved up the value chain, customer satisfaction should become the bare minimum, and customer success and purpose should become the Holy Grail. Businesses can achieve this by understanding customer purpose and then moving from yesterday’s mass-production principles to Customer Value Principles of tomorrow.

Customer success can be realised by implementing the values of a new, tried and tested customer-centric operational approach.. By sensing and responding to customer needs, businesses can benefit from improved customer and employee loyalty.

Organisations become both more innovative and capable of responding and adapting to changing customer demands. The process requires no new technologies: it simply uses existing technologies to better effect.

For an organisation to understand how it creates value for its customers, it needs to embark on a four-phase transformation journey.

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■ Re-View. Sense what matters to your customers, and measure the end-to-end organisational response capability.

■ Re-Mind. Introduce Customer Value Principles to begin the process of influencing management thinking on the organisation and control of work.

■ Re-Inspire. Provide Transformational Leadership coaching in the art of change to create possibilities and to break through to higher levels of organisational and personal performance.

■ Re-Create. Start to build the operational structures that continually sense what matters and respond appropriately.

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From Business Nightmare to Rising Star

Free Webinar Dec. 10th 2014

fresh ideasResistance to change within organisations is constant for companies around the world.

That is until everything starts to unravel. Of course by this point the business is experiencing high customer churn, runaway costs, and high employee turnover. Managers also find themselves chasing one solution after another to fix individual problems rather than finding systemic solutions.

It’s a business nightmare.

To use a seafaring analogy – the ship is adrift and taking on water. Buckets aren’t a solution. You have to get control and fix the holes.

Adaptive Lean principles are the systemic fix that will keep an organization from collapsing beneath the weight it’s own history and business culture. Gaining control of the business or simply becoming more responsive to customers requires Adaptive Lean approaches along with the right Lean change management programs that are properly aligned to the level of urgency.

Implementing lean

Join me and you will learn:

  • What Lean Principles and Lean Change Management activities can do to improve systemic issues within any organisation
  • Why breaking down silos and aligning everyone with organisational priorities makes the most sense
  • How every decision has to start and end with the customer.

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Keeping it Lean

Stephen Parry dispels the myth that being lean is about cutting waste

???????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????Of all the ideas associated with ‘Lean’, ‘cutting waste’ is perhaps the most widely known, but it is also the most misunderstood, primarily because most organisations don’t actually know what waste is. Waste disposal, waste recycling and waste paper – these terms ring familiar bells for almost everyone. But, as Lean shows us, waste is about far more than these things.

To see waste for what it really is, we must always be looking at things through customer eyes. Lean is about delivering value to the customer – and nothing else. So any time a customer tells us: ‘that is not what I want’, we can know we have created waste.

So how then, do we define value? Value is simply about delivering what customers want, how they want it and when they want it. And whenever those criteria are not met, waste has been added.

Cheaper, neater, faster waste

In the service industries, the most significant amount of waste is actually on the outside of the organisations. So why is it that when companies act to cut waste, they only take into account what they see in front of them, inside their organisation?

Look at the PC company for example, which sets up a technical helpdesk to assist customers in fixing their problems. For the company, this is a more cost effective option than sending out engineers, but look at the waste that is being created here.

In setting a 70% ‘first time fix’ target, all the company has really done is to optimise a fix that should not have been required in the first place. This is the institutionalisation of waste; creating unnecessary infrastructures to give customers information about how to fix something that should not have gone wrong. All we now have as a result is cheaper, neater, faster waste.
In the words of Peter F. Drucker: “There is nothing so useless as doing efficiently what should not be done at all.”

Self-service, or self-serving?

The notion of ‘self service’ is another good example of ‘waste cutting’ that is, in fact, waste-generating. Many of these systems are not really about service at all. And now, online, we have waste going up and down wires, and we don’t even have to feel the customer’s frustration any more. It really is ‘out of sight, out of mind’ –as in ‘you’re out of sight Mr Customer, and we don’t mind’

Online articles, for example, showing customers how to fix a company’s own blunders – this is audaciously ‘self-serving’. When we cause our customers hassle, when we waste their time, when we give them too many options – all of this is waste, and at what cost to your customer and your office? This is the real tragedy.

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Walking the customer journey

Even with the best intentions in the world, we could be inadvertently adding this kind of waste to our customers’ environments. So how then, do we remove it?

For every job in the organisation – HR, Accounts, Marketing, Sales, Call Centre – we absolutely must have a clear line of sight and clearly identified outcomes for customers. If your cannot see these clear lines through your organisation, how are you to know whether or not the work you do is actually creating value, or whether it is just institutionalising waste?

This is the central idea in our book Sense and Respond – The Journey to Customer Purpose. To understand and eliminate waste, we must get off our seats and walk alongside the customer through every step of the journey so that we develop a deep awareness of our service from their perspective. This is the first step to providing that perfect combination of efficiency and effectiveness known as customer value.

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Capability trumps output

IMG_0802In the mass-production world, the performance of individuals and departments can be determined by measuring their output – how many items produced, sold, or shipped.

Much more important, however, is what those individuals and departments are capable of doing: do they have the means of production and what is the capability of the operation? It is actually much more productive for managers to spend time developing the capability of their organisation than in trying to push to meet production targets.

Whereas in a mass-production scenario people and departments are measured by their output, in the Customer Value Enterprise® performance is measured in terms of  capability.

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Capability of means is more important than output. For example, if you were asked to drive 50 miles on gallon of fuel and your car was only capable of doing 30 miles per gallon, you might as well cancel the trip.

As you can see, the ability to measure capability is far more important than the ability to measure output.