Customer Focused Continuous Improvement – Beyond Words

Customer Focused Continuous Improvement – Beyond Words
January 2, 2013 Frederick S. Buchman

Customer Focus – probably the most over-used, misunderstood phrase in business today.  We hear it everywhere… every company is customer focused, every company prides itself on having the highest ratings in customer satisfaction.  More than ever before, companies are spending millions on achieving higher customer ratings.  And yet, Customers are ‘churning’ from one type of TV, phone, kitchen appliance, entertainment system, and even bank to another, and then another. 

Clearly, most companies today believe they are ‘customer focused’.  Yet, pursuit of continuous improvement ventures today seem more to focus on revenue growth, market share, profits, cost control & reduction, and stock price.  Manufacturers work to reduce operational and logistical costs, and reduce failures and replacements.  Telecoms work to reduce calls into customer service, and unnecessary dispatches and replacements.  Healthcare providers and hospitals work to reduce return patients and improve billing efficiencies.  Hotels work to reduce complaints, while improving fill rates and thereby profitability levels.  Restaurants work to achieve greater efficiencies, fill rates and to reduce returns and complaints.  Everywhere we see evidence of operational improvement initiatives, while we see precious few indicators actually focused on delighted, fulfilled, happy customers.

To close this seeming dichotomy between a company’s focus on customers and their desire to continuously improve performance, we will look specifically at ‘customer behavior’ and how a company can align itself strategically and operationally to this behavior in order to enable the best possible experience, from the time the customer realizes they have a need, until it has been fulfilled way beyond their expectations.

We start by asking:  “why do customers do what they do?”  We explore and segment customer behavior patterns that are motivated first by need, and then through the purchasing process to receipt and application, and compare the processes on the business side that enable and service these behaviors.  Our goal is to identify potential improvement opportunities in the business processes that influence the customer experience.

The customer behaviors associated with selecting, purchasing and applying a product or service can be broken out into 8 basic components.  These are listed at figure 1, and form the basis for understanding customer behavior ‘end to end’ (‘end to end’ refers to starting when a customer realizes a need, to when that need is fulfilled and sustained).  For each component, we start by asking:  ‘…How does the customer ____________________?’, and then assess the company’s capability to best service and support this behavior.

Cust. Exp. ‘Component’ Customer Behavior Related Business Service Process
1 Need Customer realizes they have a need Through Market & customer behavior, Anticipate need

  1. Understand gaps
  2. Design & Prototype
  3. Organize business structure to support product/ service
  4. Launch Product/ Service
2 Understand Research options, gather information Make information available: Web, advertising, published media.  Goal is to convince customer to select and buy your product/svce.
3 Select Compare, contrast, +/-, priority:  Select top 2-3
4 Decide & Purchase Decide which one is best, Purchase it (Decide, Order – (buy in store or shop, on-line, by mail, or by phone), Pay) Sell (Process Order, Purchase)
5 Receive Receive (by mail, electronically, pick up store or shop, delivery, courier) Deliver
6 Install/ Use/ Apply Initial and sustained use (also includes maintenance/service) Install/Activate and enable and sustain use
7 Evaluate Assess product or service, determine whether to keep or try again Solicit customer feedback
8 Keep or Try Something Else If keep:  determine keep, for now. Circle through step #6

If Bad:    determine churn, go back to step #2

Re-evaluate if changes in product, price, technology or market/ customer situation changes – go back to step #3

Measure performance:

  1. Customer perf. KPIs – loyalty, churn, perception,…
  2. Mkt KPIs – JD Powers, …
  3. Business perf KPIs – ROI, Sales, growth, …

Figure 1

When we look at the customer experience from this perspective, we can ask where in each component opportunities might present themselves toward improving the customer experience, and in alignment with that, where do we have opportunities to improve our business services and processes to enable the best possible customer experience.  It is our goal to bring to light these possible aspects toward continuous improvement that we will now direct our attention, as we look at each step in the customer experience.

1.       ‘Need’

The ‘Need’ component is when a customer realizes they have a need for a product or service of a particular type, either for their personal or business use.  For a company that provides a specific product or service, the challenge is to anticipate customer need, even where a gap may not have existed before, and to design, prototype and produce those products and/or services that can satisfy this need now and in the future.

But that in itself is not enough; there must be a capability to sustain, and continue to provide such products and/or services beyond market entry.

For ‘Need’, it is in these areas that continuous improvement can be applied:

–          Regarding the design, prototype and production, incorporating many of the principles of ‘Design for Six Sigma (DFSS)’, Quality Functional Deployment (QFD), and TRIZ will ensure that every decision and action will be derived from providing for a significant customer benefit.

–          Designing, Ramping up and sustaining supporting operations can benefit from continuous improvement through understanding prior launches, establishing a ‘lessons learned’ mantra, and following a detailed plan that includes realistic FMEA (Failure Modes Effects Analysis) based risk identification and mitigation actions.

Examples of best practices are Apple, in creating their ‘i’ product series, and Singapore Airlines, who managed to include many items we hadn’t even thought of for our trips.

2.     ‘Understand’ and 

3.    ‘Select’  

Looking at how a customer ‘understands’ and ‘selects’ your products and services gives us insight into the customer’s behavior in this respect, and helps to focus on those things that will not only inform and educate, but also convince the customer to include your brand in setting up their selection and decision to buy.  We therefore want to know how the customer goes about researching and gathering options and the methods they use to compare and contrast to help in the selection process.  These insights will help the company structure highly effective customer information and education methods.

Continuous improvement opportunities abound in this arena, to always be looking to further improve knowledge and understanding of our products and services, and how they are the right selection for the customer.  We can determine how effective this is through surveys and focus groups, and improve those appropriate elements in this regard, by comparing customer perspective and knowledge with real facts, and work to close key gaps that prevent or inhibit positive understanding and selection.  Some of the same tools we talked about in ‘Need’ can apply here as well, such as QFD and FMEA.  Ultimately, the measure for success here is to see increases in customer final selection toward purchasing your product or service.

Examples of excellence are Amazon, and Ford Motor Co., who both excel in educating and persuading the customer to their product and service advantages.

4.       ‘Decide and Purchase’  

How a customer ‘decides to buy, and purchases’ your products / services involves key criteria coupled with a decision making process by which to compare and contrast pros and cons.  This is where the customer decides from the final selections which to purchase.  It becomes critical for an organization to understand that criteria and present credible, clear, understandable information directly related to what the customer is looking for, and how their product/ service can provide exactly what the customer needs.

Continuous Improvement opportunities suggest themselves in 2 areas:

–          Support decision-making through anticipating questions and other information necessary to making the decision, and also through review and mitigation for possible missing or erroneous information that the customer deems important for comparison and decision purposes.

–          For the purchasing / ordering aspect, work to make the sales and ordering process seamless, simple and effective in the customer’s eyes.

Good examples of seamless purchasing processes can be found online and in some stores such as L.L. Bean, Amazon again, iTunes and others that have drastically simplified the purchasing process.

5.       ‘Receive’

Customers can receive products and services through many different media, related to what those products and services are.  For example, software programs or games can be sent via download (from website, advertisement, or on-line) and/or on media (CD, DVD, or USB device).  Devices or physical products can be shipped (USPS, UPS, FedEx, or courier) or purchased at stores (retail sales, pick up previously purchased items) or some mix as appropriate and desired by the customer.  The key will be to understand what the customer values in the method desired to receive products and services provided by your company.

Continuous improvement opportunities would focus primarily on successfully delivering when desired, by the method desired, to be assessed primarily through customer input, and correlated with delivery data.  Again, it is critical to understand customer expectations here, in order to provide the best customer experience.  The best opportunity is when customer expectation aligns with business process performance.  If this is not directly achievable, establishing a real-time feedback to better understand and drive to close the ‘receive’ gap (expectations/desires vs. reality).

Examples here would be FedEx and UPS, who have pioneered real-time receipt confirmation and acknowledgement.

6.       ‘Install/Use/Apply’        

As we have seen, customer behavior (and expectations) can be very different than what is expected regarding how a product or service is used or applied.  This includes sustained use as well.  Many companies make the mistake of separating maintenance and repair from initial sales and use, resulting in multiple pathways that often contradict regarding initial and sustained customer use.

Continuous improvement opportunities present themselves through feedback, returns, and other communications coming back regarding product and/or service performance.  Proactive solicitation is an excellent way to obtain customer perspective regarding how they want to use or apply the product vs. how they have to do it.  It is here that we see full capability to use the lean and six sigma tools, and some organizational methods as well.  We look at 3 different customer experience perspectives:  Installed systems, customer use, and maintenance and support services:

–          Installed systems – Evaluate customer experience success levels, where the failure in first-pass yield has occurred, and any opportunities for lean applications to make this process simpler, cleaner, and more effective.

–          Customer use – look at communication from customers (calls to care, complaints, feedback and warrantee returns, for a start), see how they are using the product or service, and work to improve those related support processes

–          Sustained use – look at maintenance and repair levels, and sustaining activities to support customer product and/or service use.

Examples of excellence vary greatly regarding this area.  The good ones focus beyond warrantee work to all customer maintenance needs, and live by the mantra of: ‘fix it right the first time’.

7.       ‘Evaluate’

This component often happens in parallel to ‘Use / Apply’; from the moment the customer first uses the product or service, through sustained use and/or application.  It is critical to understand how the customer is evaluating their success with the product or service (again, do not confuse this with what you think is working well…. You need to get information directly from customers on this, as objectively as possible, so as to detect early any anomalies between what you are measuring and what the customer values.  This assessment will also determine whether the customer will want to keep your product or service, or churn out as a customer and try something else…  Note that this links very closely with the 2nd and 3rd components, ‘understanding’ and ‘selecting’, in that a customer will reflect on what is obtained, and compare to what was desired, in order to determine viability of sustained loyalty.

Continuous improvement offers multiple opportunities regarding the customer evaluation of the product and/or service.  Certainly, customer feedback is essential to any improvement program, so understanding and diagnosing issues from such feedback is critical to expose and eliminate waste and other Lean ‘bad practices’, such as multiple inspections, circuitous routes that take too long and go much farther than planned), rework, long set-up, or other aspects related to cost reduction, quality and speed to the customer, for both the product and customer service.

Examples would be J.D. Powers, several of the automotive assessment proponents, and others that set the standards for their industry.

8.       ‘Keep or Try something else’

Customers will ‘keep’ a product or service based on their need, how well it is being currently fulfilled, and if such success will continue in the future, given possible changes that are coming soon.  This is another area where organizations often drop the ball, in their belief that once a customer signs up, they will stay for life.  In fact, customer trends in this area change frequently, due to job changes, family changes, and other life-critical aspects.

Continuous improvement opportunities here should focus on what is really important to the customer first.  Certainly, as a second, the performance of the company is key, in terms of potential KPIs on the fundamental customer metrics.  However, it will be important to understand what drives this decision to keep or not, and may not be directly related our ‘operational’ metrics, yet will drive customer to keep us.

Examples of the best practitioners show continued capability to receive input from their customers, and are working to constantly improve and change their designs and delivery processes to keep up with demand, and stay ahead of technology.

In this brief discussion, we attempted to better understand the alignment between the customer experience and the related continuous improvement opportunities that present themselves.  The important thing to remember is to always ensure a connection between your continuous improvement strategies, projects and initiatives to something that would be important to the customer, not just to profitability or reduced operational costs.  In this way, you assure that your program will always be focused appropriately, to the best opportunities for your customers and your business.

 

It was in defining this ‘end-to-end’ framework that we spent most of our discussion last month, where we identified the 8 basic components of customer behavior, from when their needs are realized to when they are fulfilled and sustained.  We spent some time on each component, from ‘Need’, ‘Understand’ and ‘Select’ to ‘Decide & Purchase’, ‘Receive’ and ‘Install/Use/Apply’, then to ‘Evaluate’; and finally to decide to ‘Keep or Try Something Else’.  The idea is to thoroughly understand the behavior at each component, and then determine what actions you can take to enable and support the customer’s requirements.  The better you can help the customer, the more likely they will be comfortable selecting and purchasing your products and services from you.

Our journey will now take us into each component in greater detail to: better understand the appropriate requirements, align your strategies and policies, and study the internal resources, processes and methods to best support and sustain these needs.

This month, we will focus on the first component – that initial need that the customer experiences when they first realize they have a need for a particular product, component, part, or service.   While they have not yet begun their search, they are already forming an idea of how it should look, function and resolve their need.  We will look at what it means from a customer behavior standpoint, and then discuss related business services critical to enabling the customer realization to not only be fulfilled, but to bring them to your door in realizing you have exactly what they need.

To refresh, Figure 1 provides us all 8 customer focused ‘components’ as discussed above. 

Cust. Exp. ‘Component’ Customer Behavior Related Business Service Process
1 Need Customer realizes they have a need Through Market & customer behavior, Anticipate need

  1. Understand gaps
  2. Design & Prototype
  3. Organize business structure to support product/ service
  4. Launch Product/ Service
2 Understand Research options, gather information Make information available: Web, advertising, published media.  Goal is to convince customer to select and buy your product/svce.
3 Select Compare, contrast, +/-, priority:  Select top 2-3
4 Decide & Purchase Decide which one is best, Purchase it (Decide, Order – (buy in store or shop, on-line, by mail, or by phone), Pay) Sell (Process Order, Purchase)
5 Receive Receive (by mail, electronically, pick up store or shop, delivery, courier) Deliver
6 Install/ Use/ Apply Initial and sustained use (also includes maintenance/service) Install/Activate and enable and sustain use
7 Evaluate Assess product or service, determine whether to keep or try again Solicit customer feedback
8 Keep or Try Something Else If keep:  determine keep, for now. Circle through step #6

If Bad:    determine churn, go back to step #2

Re-evaluate if changes in product, price, technology or market/ customer situation changes – go back to step #3

Measure performance:

  1. Customer perf. KPIs – loyalty, churn, perception,…
  2. Mkt KPIs – JD Powers, …
  3. Business perf KPIs – ROI, Sales, growth, …

Figure 1

So, we now will direct our thoughts to the first component, that of ‘Customer Need’, which materializes when a customer ‘realizes that they have a need for something’….

From our introduction last month, we described ‘Need’ as follows:

The ‘Need’ component is when a customer realizes they have a need for a product or service of a particular type, either for their personal or business use.

For a company that provides a specific product or service, the challenge is to anticipate customers need (even where a gap may not have existed before) and to design, prototype and produce those products and/or services that can satisfy this need now and in the future.

But that in itself is not enough; there must be a capability to sustain and continue to provide such products and/or services beyond market entry.

To see how this works, we ask what customers first do when they realize they have a need.  For the most part, customers will need a product or service for: their work (for example, needing a component for an assembly they are designing, certain materials, or other job-related needs); personal life (such as a great meal, an oil change, a certain type of attire, or a haircut); or for someone else (such as tickets to a show, arranging hotel or travel accommodations).  To be able to anticipate this need, we first have to understand the circumstances that would suggest such a need, and for what purpose they would require this need fulfilled.  Given this understanding, it would be possible to design the ultimate product or service that would meet this need – not just once, but as many times and in as many different circumstances as can be achieved.

‘Need’ itself is a complex concept in that caution is warranted not to interpret a customer ‘need’ purely in the eyes of your products or services.  For example, 10 years ago a CD distributor would interpret a customer’s desire for music to be fulfilled through purchasing CDs, and would therefore stock the hottest albums.  Today, customers can purchase specific songs and create their own ‘albums’ through iTunes and other on-line markets.  The business that confines its strategy only to products and services will miss key competitive opportunities, and could lose everything if and when the market shifts.

Once you begin to understand the customer ‘need’ and how you can best meet this need, your next steps are critical to setting up and enabling your business to fulfill this need in a sustained way.  There are 4 key steps.  These steps have to be done in order; however, they can overlap depending on how much of the product or service already exists, and how much has to be created from scratch.  They are:

  1. Understand the gaps – These are the gaps between what the customer needs and what they can currently get.  Understanding these gaps also includes defining them in a way that helps your company understand where to invest, in terms of closing these gaps and creating a sustainable competitive edge.
  2. Design and prototype – Once you know what is required to close the gaps, you can design the product or service and the supporting processes, test prototypes or trials, and refine the design until it performs as expected.
  3. Organize business structure to support product / service – Once the product/service and processes are proven, the entire company must be reassessed in terms of how it is organized to support the creation and delivery of your products and services in the best way possible.
  4. Launch product / service – Finally, with the organization in place, processes optimized, and products / services verified as to their added value to the customer, you launch and monitor performance through scorecards and dashboards at every level participating in the processes.  Adjust as you ramp up to a sustained production capacity.

As we can see, understanding the need accurately sets the direction for everything else the company does.  This concept is the most critical, so we will spend some time discussing it in greater detail.  We will look at different situations where customers need a particular product or service, and how different organizations have addressed this need.

–  Restaurants:  Customers go into restaurants to have a pleasurable dining experience.  This means placing orders easily and effectively, not having to wait too long, great tasting food, and pleasant, attentive service.  In America, we are often seated at the table, given menus, and have to select what we want – then wait for our meals at the table.  However, in the UK, guests are seated in a lounge area, given menus, and offered refreshments while they select their meals.  Then, once they order, they stay in the lounge until their meal is ready, and then are called to the table to enjoy their meal.  Afterwards, they can retire back to the lounge for dessert, drinks or just to socialize until they are ready to leave.  Music is often provided, along with some entertainment, or maybe a TV to watch sporting events.  These restaurants have ‘reframed’ the dining experience beyond just a meal to be ordered and consumed, and have loyal customers who return repeatedly for the meal and the experience.  These customers know the owner and most of the wait staff and cooks (who come out personally to see how the meal is going).

–  Air travel:  It was not that long ago that you had to have a paper ticket, boarding pass and be checked at your gate an hour or so ahead of your flight.  But these days, you can ‘check in’ online, 48 hours ahead of your flight, print your boarding pass, (or have it sent to your smart phone), and go directly to your gate 30 minutes before departure.  These improvements eliminated cumbersome process steps that did not add value to the customer’s experience.

–  Movie Theaters:  Customers need to arrive, go in and watch their movie.  But not too long ago, you had to stand in line, pick your movie, buy a ticket, then go inside and stand in another line to show your ticket and be let in.  Today, you can order your film on-line ahead of time, arrange to have tickets waiting for you (or have the ticket sent to your smart phone directly), and then just go, pick up your tickets or scan your phone, and in you go.  Again, the non-value added process steps have been eliminated, to make it a more pleasurable experience for the customer.

–  Books:  Customers want to get the books they want and read them immediately, if possible.  Amazon listened to hundreds of readers and book enthusiasts and has subsequently re-defined how customers can and do buy books.  We used to go to a book store to purchase the books we wanted, if they were in stock.  If not, we would put them on order and wait a week or so, then go back to the store to purchase and pick up.  Today, we can order books online (e-book or audio-book format), purchase and download instantly for our enjoyment.  For paper based books, we can order from an almost unlimited inventory to be delivered in a day or 2 wherever we want.  The bookstores are realizing this takes away their clientele and have taken up the challenge by enhancing the customer experience in the store, through expanded services such as coffee and cake shops, free Wifi, and more comfortable reading areas.  The proof will be in whether these added offerings will be seen as ‘value added’ in the eyes of the customer, as demonstrated by sustained traffic and sales levels.

–  Manufacturing:  Companies that make products want to get materials, components and other piece parts easily, on time and with minimal waiting or added processing.  Typically, purchasing agents (guided by a bill of material) buy components, raw material and other piece parts according to some scheduled demand level to be delivered to a central assembly facility which builds a final product for delivery.  Vendors provide these piece parts or components, manufactured to very exacting specifications.  However, with the advent of 3D printing, many of the piece parts and components can be manufactured directly to the specification and quantity required (given that they can be made of composite materials).  Hundreds of components, small assemblies and other items made of various plastics and composite materials can be manufactured within minutes where it took days or weeks before.  Rather than trying to reduce inventory, improve shipping or order response time, this dramatic change altogether eliminates the waiting, unnecessary inventory, transportation, inspection, shipping, and other wastes.  This all enables a company to manufacture parts needed and assemble them in a fraction of the time.

With these and countless other examples, it is clear that understanding the true value as viewed by the customer’s need can re-frame how a company answers that need, and give that company a significant competitive advantage to sustained performance.

After launch, it is imperative that a company develop the means to track performance and adjust its strategy and operation accordingly when things change in the market’s or customer’s point of view.  This points to a sustained continuous improvement (CI) program.  To take what was put in place and immediately seek to improve or evolve – aligning to new ways to meet the customer needs.  There are 2 distinct areas that can benefit from a CI perspective, namely:

1) Regarding the design, prototype and production, incorporating many of the principles of ‘design for six sigma
(DFSS)’, Quality Functional Deployment (QFD), and TRIZ will ensure that every decision and action will be derived
from providing for a significant customer benefit.

2) Designing, Ramping up and sustaining supporting operations can benefit from continuous improvement through
understanding prior launches, establishing a ‘lessons learned’ mantra, and following a detailed plan that includes
realistic FMEA (Failure Modes Effects Analysis) based risk identification and mitigation actions.

Examples of ‘best practices’ we offered last month included Apple in creating their ‘i-’ product series (especially their iPad product line), and Singapore Airlines who managed to include many items we hadn’t even thought of for our trips.  There are dozens of other examples such as: 3M and their hugely expansive paper products lines, Amazon.com in the way they have revolutionized the way people buy books, and Cleveland Medical Group where they really understand the entire patient behavior and experience needs (from before the appointment is made to years after treatment and cure).  These examples can help us understand how we can move from merely ‘satisfying’ our customers to creating loyal, impressed, believing repeat customers that don’t think of ever going anywhere else for what they need.

So in this follow-on discussion, we focused on the first of the 8 customer components, that of the customer need, and how to understand and answer it the best way possible.  Realizing also that things are always changing, we recognized the need to continuously improve or evolve our processes, rethinking how we will continue to meet the customer needs, and we looked at several examples where this has proven valuable over the last decade.  The next installment will look at the ‘Understand and Select’ components where the customer researches options and gathers information for the purpose of comparing and contrasting options in order to select the best product or service that serves their needs.  By understanding these customer ‘components’, you assure that your program will always be focused on the best opportunities for your customers and your business.

By Frederick S. Buchman


Working in Operational Excellence over 25 years, Frederick S. Buchman is the President and CEO of Hayward Enterprises, Inc., and is a recognized international author, speaker, coach and consultant on Operational and Process Excellence programs, co-authoring multi-language books on systems for management such as balanced scorecards and dashboards.  His organization has helped many Fortune 100 companies worldwide in successfully designing, executing and integrating their continuous improvement programs, and also often assists with senior leader qualification, executive team development, and working with companies big and small to achieve and sustain their performance goals. 

 

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