Is there any principle more core to the heart of lean than relentlessly focusing on the customer? How many companies have strayed from customer focus as their strategic North Star? Who cannot tell at least one story of poor customer service, irritating chatboxes, painful refund processes, inept after-sales services and the rest? Surveys confirm every year that billions are lost in poor customer services. Losing sight of the customer has certainly allowed many former tenants of a trade to expose themselves to major disruptions of the type shown in the video on clean disruption by Tony Seba, that shows how cars replaced horses in New York in the course of 13 years. Both short and long term enduring lean success are rooted in a customer-focused lean strategy.
The following collection of short pieces argues persuasively for elevating your customer focus as the heart of lean strategy. Rose shares a great illustration of how you may drain your resources changing things that on the surface seem critical, but in your customers’ world, make zero difference. Lucy reflects on the vital components of a lean strategy, starting with a customer focused CEO and vertical and horizontal alignment.
Sandrine reminds us of the dangers of “big company disease” and how Value Analysis – Value Engineering (VA-VE) can help those companies affected by the symptoms. Neglecting the customer can expose your company to missing out on key short and long term changes in the market. Catherine asks whether any company be lean without being customer obsessed, and provides real life examples showing how customer obsession is a necessary condition to sustainable growth.
Jean relates customer focus to its effect on our P&L and Balance Sheet, through what she describes as the 5 economic levers. Anne Lise challenges us to confirm whether you really have customers on your mind; and warns against the risk of optimizing your own processes rather than boosting value for the customer.
And Cécile concludes the review with 3 simple lean markers: do the right thing and do it right, sell one - make one, and stay in touch.
Be sure to define value in the customer's own words, and not your own.
What is a Lean Strategy? I see it as the top-down and bottom-up union of what must change. With a view to the future, leaders figure out how to stay relevant, be competitive, grow the customer base, be profitable – ultimately delivering on the value-driven purpose. Those in the public sector may focus more on service delivery.
But is it enough? Grand plans get lost in translation when problems at the frontline are hidden and don’t feature in the priorities. Ask yourself: “Am I on the pulse of the issues; the Achilles heel to getting our strategy done?”
The simplest way to start is to regularly visit where customer value is created, observe and ask (non-interrogative) questions about how things work, getting to grips with the pressure points.
Then marry this intel to what must change. The true issues come to light and complement the strategic focus. In this way, you create a connection between strategy and what people are improving every day. Of course, there’s work to be done in developing your people for this – a topic for another day!
What about a customer-focused lean strategy? Recently I visited a manufacturing plant in Kuwait to chat about strategy and getting the right things done. The CEO was passionate about change. He was that guy who visited the floor regularly and could explain - complete with evidence - the issues at play there. He said that the layout was a mess, the flow was poor and he wanted this to be solved--stat. Walking the floor, you could see he was right. Work-in-progress was scattered all over, pushing through the value stream like migrating wildebeest fighting their way through a Serengeti river. It wasn’t pretty.
Over dinner I asked him what keeps him up at night. Without hesitation, he said customer returns. Probing further, he explained that customer returns were at their worst – bad quality was making its way into the hands of the customer, eroding profits and even worse, making the customer think twice about doing business with them. So, we continued to dig deeper. What was the real issue? Fix the layout? We could have whipped out our arsenal of lean tools and got cracking on fixing that layout and flow; but without understanding the customer returns and the source of this problem in the value stream, we were at risk of fixing an obvious problem with no impact on customer value. A slick, new layout is useless when the contract is lost. What was the customer willing to pay for here?
Once you know what is important to your customers (perhaps segregate them into categories since you can’t bend to every whim), use tools to analyse the problems and bring intel back into the strategy.
Caution! Be sure to define value in the customer’s own words, and not your own.
You can use frontline intel for issues impacting the goals and shareholder needs too. But without placing the customer at the heart of the focus – you may drain resources changing things that on the surface seem critical, but in your customers’ world, make zero difference. Let your customers help to keep your strategy honest.
Lean transformation requires a long term, comprehensive approach. Leadership, management system, process and people must all be aligned to a common focus: customer focus.
A few years ago, I spoke to a group of MBA students on Strategy Deployment as a guest lecturer. When I asked them to share their definition of strategy, the students gave me a wide range of answers. I was surprised, as they had just completed a course on Strategic Management. So, I asked them to Google it. The definition of strategy in English by Oxford Dictionaries is: 1) A plan of action designed to achieve a long term or overall aim; 2) The art of planning and directing overall military operations and movements in a war or battle.
I highlighted a few key words in the above definition to frame my argument about lean--which Toyota does not use as a term internally. One of the most reputable organizations on providing a definition of lean is the Lean Enterprise Institute, which states that "lean" was used to describe the Toyota business system during the late 1980s, by a research team headed by Jim Womack, Ph.D., at MIT's International Motor Vehicle Program. The core idea of lean is to maximize customer value while minimizing waste, which is the purpose of the Toyota Production System.
So lean strategy is a plan of action designed to create more value to customers by eliminating waste over the long term. Forming and implementing a lean strategy requires a long term, overall plan, and action to align the entire value chain effort. There are a number of key success factors in meeting this challenge:
1: A customer-focused CEO and the company board: set the clear direction and mid to long term lean strategy. This requires consistency and leadership continuity.
2: A management system designed to build vertical and horizontal alignment: connect the primary and supportive functions, to focus on creating value for the customer.
3: A streamlined process to produce the best quality output just in time for customers with minimum input: not just looking at one session, but the entire value stream (end to end).
4: A capable and engaged workforce with a clear understanding of who is my customer, what can I do better each day to eliminate waste and create more value. To achieve this goal, it requires organizational leaders to invest in human resource development from a long term perspective.
There are some successful examples, apart from Toyota, on how organizations have succeeded in driving a customer-focused lean strategy. I find the Virginia Mason Hospital transformation story to be inspiring. They embarked on a lean journey, starting with sending people to Toyota Japan to learn, and then built the Virginia Mason Production System, with a focus on patients’ needs. This complete approach, from top to bottom and in every function, to drive lean implementation has enabled them to get out of the crisis in 2000, and become one of the top hospitals in the USA for many consecutive years.
Creating more value to customer is the centerpiece for formulating and implementing a lean strategy. Lean transformation requires a long term and overall approach. Leadership, management system, process, people must all align to a common focus: customer first.
Stop everything and fix each and every customer issue.
Can a company be lean without being customer obsessed? There is a world between corporate sentences like “we value our customers” and real customer obsession. When you are seriously devoted to your customers, you do not rely solely on market studies or customer panels; you do your genchi genbutsu and go live their life. You do not just issue monthly reports on the number of customer claims; you share each claim with the key stakeholders (sales, logistics, production) and act on it, one problem at a time. Customers do not hear “it is not my fault, Function X or Y did it, not me”; they are sincerely listened to and protected by a quick countermeasure (a substitute, a refund, a downgraded restoration of the service…) while we work on the root cause.
It is hard by the way to stop everything to go fix a customer issue. I remember the resistance when I adopted Jidoka in an IS department: once the system was rebooted and the service up and running again, few were willing to sit and think through the PDCA cycle. But that IS department installed and maintained production systems in plants which managed picking orders, traceability and production manifests. Any failure in those systems would stop the production line. It turned out the PDCAs on those failures were teaching us quite a lot about data flows and data accuracy, networks, data centers, critical equipments, local systems release management...and on our customer's daily life! This in turn increased our understanding of what they needed and helped design better solutions for their shopfloor daily activities.
In another instance, earnest inquiries into recurring consumer claims in an industrial food business, and a bit of gemba, unearthed the fact that, if the machine failed to include a fork with the salad bowl, nothing prevented the salad from being packed and shipped. No ejection process, be it manual or automated, had been designed for the machine: one could only helplessly watch the salad bowl being wrapped up into its glossy package!
Seriously dealing with customer usage issues, with a solid Jidoka approach, can even lead to innovation. A kaizen on lead-time reduction, in a web marketing agency I visited, led to the design of a new tool that now provides customers with an immediate and automated mapping of the weak points of their advertising campaign on the web. An innovation that gave the agency a serious edge over competition, as this diagnosis seldom took less than a week before and is now done in a few minutes.
Genchi Genbutsu and putting ourselves in the customer shoes are opening up worlds to us. It helps us see life through the customer’s eyes and identify the usage issue on which we could offer a better match: this is the first fact-collection step of innovation.
Customer obsession requires us to take serious care of those in our company that deliver the goods, failing which the customer experience may not be that great: production lines, sales offices, service desks need our full attention and available support. Regular visits to those teams is a great way to see what customers suffer from. I know a successful lean company that never starts an ExCom meeting without a trip to the gemba of the Sales Department to review and discuss one recent claim.
Customer obsession forces us to seriously look at what the other providers do and to tear down their products or services to try and outperform them.
Customer obsession goes with the idea of “once a customer, always customer” and will consequently lead us to be prepared for changing consuming modes, environmental expectations, looming competition and other threats.
Customer obsession and regular genchi genbutsu to check how customers fare are a necessary condition to a lean strategy and to sustainable growth. But, to quote Deming, “Learning is not compulsory... neither is survival”.
When a company loses customer focus, even temporarily, it stops paying attention to market changes and fails to innovate in the right direction.
Developing a strong customer focus can be a matter of life and death for companies, whatever their size. A well-established firm with a leadership position may take longer to go belly up than a startup, but the result remains the same. When a company loses customer focus, even temporarily, it stops paying attention to market changes and fails to innovate in the right direction.
Today’s world is so competitive and fast-moving that no one can ever afford to lose sight of evolving customer tastes and desires and new alluring offers that keep popping up every day. Unfortunately, as a company grows, it starts developing “big company diseases” that push its employees to spend more energy on internal issues (silos, rigid processes, micro management, conflicts, etc.) and less time keeping an eye on the market (where is the next challenge coming from?). This is often the beginning of the end for any company. Jeff Bezos’ obsession with customer satisfaction and maintaining a “Day 1” culture is legendary, and for good reason. Many startups, especially in the digital or environmental fields, succeed in finding a market niche, but after 4 or 5 years of exponential growth, they often run into a wall: their product does not find demand abroad, or their next product generates little or no revenue. They realize that their initial success may have been due in a large part to sheer luck. Luck is definitely a factor of success, but without a sound and proven method for understanding and producing customer value, luck will take you nowhere, as it cannot be repeated. So how can a firm learn to keep a strong customer focus and continue creating value as it scales up? Lean provides an excellent response to this question.
The objective of lean is to create more and more value for customers in order to keep them fully satisfied, all the time. Producing value for customers consists of completely resolving their problem without imposing our waste, i.e. the cost of our false assumptions and mistakes.
A “value analysis / value engineering” strategy (VA/VE) will help a company do just that, by continuously engaging people in:
- understanding what customers are trying to do with the products and in which situations they don’t succeed,
- finding the flaws in the product and see how they translate into waste in people’s work methods
- improving the functions and performance of the existing product based on these findings
- researching the next innovation that will convince customers to remain loyal to the brand
- providing them with new offers on a regular basis to keep them happy and excited at the same time.
The secret? Releasing new offers that are more stable than the previous ones, yet proposing new innovative ways of resolving the customer’s current problem. However, we have to be careful not to change the customers’ habits too radically with every new release so we can give ourselves a chance to test the new concept without taking too many financial risks. By setting what we call in lean a “product takt time”, a regular pace of release usually driven by the market, we have a better chance of keeping a strong customer focus and staying ahead of the competition. For a company to grow sustainably and be profitable over the long term, it must be customer-focused, and really mean it. VA/VE is the lean path to get there.
Reduce your non-value add waste in order to raise the customer value of your product or service.
Reduce your non-value add waste. Use this reduction to raise the customer value of your product or service. This increases demand. This utilizes the freed up capacity you generated from waste reduction. Repeat. This is the Lean Business Model.
Waste elimination is a cornerstone of lean thinking. But what really is waste in a company? Using lean thinking, waste is something a company does that their customers don’t really care about. They select a supplier because of a need for a type of work activity, product characteristic, or service capability that is offered; not because of the countless, often waste-laden processes done to run a company.
So, what are the manifestations of waste—often unseen—inside a company that reduce the product value? Waste is either an activity a person does, or materials or capabilities purchased. To determine what is waste, you have to understand what customers need and value. With that knowledge, you can then make changes to reduce doing the unnecessary work that customers don’t care about like rework, excess processing, or so many other things that fit under any of the 8 wastes. These wastes affect all elements of economic outcomes. By applying the five levers of the Lean Business Model, you will better see how understanding customer needs will affect each lever. For example:
1) Reduce Cost: by understanding the frequency at which a customer needs your service, you can align your workers to that frequency minimizing overtime costs and expediting costs.
2) Generate Demand: By minimizing wait times, you can reduce lead times for customers and better meet the precise times customers want to receive your services and products. By reducing quality defects, you can provide a product or service that exceeds your customer expectations and become the preferred supplier.
3) Improve Product/Service Variable Margins: By deeply understanding customer needs, you can design and innovate new products and services that satisfy what the customer cares about using processes that are repeatable and by eliminating excess costs and activities. By improving your time to market, you can provide more innovation that your customers cannot find elsewhere creating price inelasticity.
4) Improve invested capital: By understanding your customer needs, you can reduce the need to stock excess products, improve quality so customers pay timelier, and ensure equipment is sized for actual customer need.
Each of the five economic levers are improved by deeply understanding customer needs, and then moving your time, activities and resources to those needs, and not to the needs of internal and traditional organization structures or just “…because we have always done it that way.”
For more information on these five economic levers, read The Value Add Accountant.
Anne Lise Seltzer
Ask yourself the question: am I helping my clients solve her problem or am I creating new ones for her?
Although most companies claim to be customer focused, as customers ourselves we pretty well know how to evaluate the reality of a customer relation.
In our interactions with our own "suppliers", whether physical, online or over the phone, we know the difference between:
- An insurance company that helps us take all the necessary steps and settles a claim quickly, and one that keeps asking for evidence or supporting documents and takes 3 months to pay;
- A store that welcomes us in a pleasant, clean, organized place to facilitate the flow of purchases, as opposed to a store that uses its fitting rooms as a storage place, generating a waiting time twice as long;
- A hospital that spreads patients’ appointments along the day and a hospital that summons everyone at 8am and keeps some patients waiting 5 or 6 hours;
- Not to mention issues related to poor customer relations, quality, flow, price....
We also know how to share our experience, especially when we didn't like it: several studies show that a "dissatisfied" customer shares their experience 3 times more than a satisfied customer. With the multiplier coefficient of social networks, 10 people who hear you say you are dissatisfied quickly turn into 1000!
We also know how to draw the consequences on our future purchasing decisions and go look for a new supplier if necessary.
The lean strategy is built ontologically to avoid reaching this stage because it is based on the following assumption: if our customers are "very satisfied", they will come back to buy our products and services and the company will grow. The company's growth is seen as the direct result of customer satisfaction.
While this simple assumption may seem obvious, even companies that engage in a lean approach can forget it along the way.
When I coach a team, I often offer people the opportunity to share their latest experience as clients, both those that were excellent and those which turned horrible. Participants emotionally rejoice or sympathize as their colleagues’ experiences with their garage, telephone operator, airline are told. But when everyone is asked to think about what their own customers could experiment when using their products or services, I often get silence and puzzled looks, as they become aware that they too, as a supplier, can create unfortunate experiences for their customers. With the risk that the latter will leave for a competitor who will have taken greater care to meet her customers’ expectations, offering them the value they expect from the service.
Without a real customer focus at all levels of the company, there is a risk of remaining within our own frame of reference, focused on what creates value in our own eyes, within our own function, with the ambition of optimizing our own process, and forgetting to check whether it creates or destroys value for the company's customers.
With a lean strategy, each customer is key to the company's development. The company's goal is to understand the value expected by her customers, each of her customers. And this means going to the customers' premises, and creating this value at the best cost (see Jean's article).
Ask yourself the question: am I helping my client solve her problem or creating new ones for her?
One strategy: Lean. One North Star: customers!
A company, for its survival, must be profitable. Shareholders, employees, managers want to be able to invest, run the company, get paid, receive their dividends. Everyone wants... cash.
But who brings the cash? Customers.
That alone is a good enough reason to take care of our customers. The customers have something that is essential to the survival of our company, and we can only get it if our products provide the services that will make them happy and bring them back.
What is a Lean strategy? In a rather paradoxical way, one could say that it is a question of working... backwards. Traditionally, we try to know (to guess!) in advance THE right solution, THE right product, THE right way to do it. But it would be a hell of a stroke of luck to do it right if we relied only on our brilliant intelligence. The Lean strategy is to set a North Star and move forward by discovering all the obstacles as they arise, to constantly adjust our course to the reality of the situation. In Lean, we consider that we are constantly challenged by the context, we have to face the challenges of reality. The big challenges (arrival of new players on the market, absolute necessity to reduce the unbridled use of our planet's resources) as well as the small problems (the failing supplier, the expert's ski accident...).
But all this is only true because the North Star is clearly visible in the sky. And what can the company's North Star be if not... its customers? They are the only ones who can buy the products, the services, the only ones who can guide, through the use they make of them, towards the problems that the company's products will be able to solve.
All this also applies because the big challenges we choose to face are the right ones. Should we consider Digital as a technological challenge or an opportunity to get to know our customers better? Is ecodesign a constraint or an opportunity?
The customers are the key players when it comes time to make or break the P&L. Therefore they (the payers and the users) must remain the constant obsession of everyone in the company.
Sticking to customer demand means at least three things:
1) “Do the right thing, then do it right”. Understanding what will be the right product, the one that will make the customer loyal, before trying to do it right (i.e. by reducing waste generated by our misconceptions). There is no need to improve the process of creating a product that does not solve our customers' problems. We lost a tender offer for which we were 100% compliant with all the requirements because one of our competitors proposed a totally different solution, where the robustness of the system no longer came from the elementary robustness of each component but from the reconfigurable combination of much less reliable elements individually; all this at an unprecedented cost. However, we were convinced that we knew this customer well, and that we knew what he was willing to accept!
2) “Sell one, make one”. The just-in-time approach provides the flexibility that customers require, and makes it possible to detect problems (deviations, defects) to be dealt with immediately, in order to reduce our cycles in a sustainable way, improving quality and customer satisfaction. The implementation of just-in-time in one of our customer support teams has enabled us not only to reduce our intervention times by more than 75%, with better quality, but also to develop problem-solving skills among all employees that have made them more innovative, and thus improve our customer offer.
3) “Stay in touch”. Listen to the customer all the time. A project for a given customer can evolve over time. The ability to co-design with the user can be a major competitive advantage. But it is also necessary to take into account the necessary evolutions that occur inexorably during the duration of a development. Change is happening faster than we are changing! The final product will not always be the one you started to design.
One strategy: Lean. One North star: customers!
AUTHOR BIO: LEAN SENSEI WOMEN
Coming from different continents, horizons and professions, the individuals who form Lean Sensei Women are all recognized lean Senseis, who help companies and organizations build sustainable growth through lean management. They believe in the development of people, respectful of both teams and environment, with a view to produce more value for customers and to society.
Catherine Chabiron: Board Member, Institut Lean France. Author of Notes from the Gemba in Planet Lean and executive lean coach.
Jean Cunningham: Jean Cunningham, a former CFO and LEI board member, is widely recognized for her pioneering work in lean business management systems and the lean office. Her books include Real Numbers, The Value Add Accountant, and Easier, Simpler, Faster.
Lucy Liu: Currently the Head of Supply Chain Academy for Asahi Beverages, Australia and New Zealand. Over a 28-year stint with Toyota starting at the shop floor, she progressed to management roles include Australia TPS Office and Capability Development Department Manager.
Sandrine Olivencia: Lean sensei and member of Institut Lean France. Specialist in Obeya and product development expert for the digital world.
Cécile Roche: Lean sensei, member of the Institut Lean France, Lean Director of the Thales Group, and author of several books, in particular on Lean in Engineering.
Anne Lise Seltzer: Member of Institut Lean France. Lean Coach in Services and Support functions. Trainer for Lean & Learn at SOL France (learning organization).