OMG! Customer Channel Madness! Getting Strategic about Customer Relationships (Part 2)

In Part 2 of this series, we continue on the journey to designing strategic customer processes & solutions, managing the myriad of customer channels, and focusing on the right metrics, to yield profitable, lifetime Customer Relationships.

At this point, you’ll notice there’s been scant mention of technology solutions, or how to quickly get into the Social Media (Facebook, LinkedIn, Twitter, Chatter) buzz.  Yes, these are new, powerful channels for your business to integrate into your customer relationship eco-system, with great excitement and appeal, and we’ll address these solutions a bit later,… but “how” and “why” you engage, with measured insight and informed action is more important at this point than the “what” tools and tactics to deploy.

The Strategic Roadmap

In Part 1, we started where an existing company should start – what do your customers think, how loyal are they, and are you servicing them the way they want to be, and as you would want to be serviced?  With insight from assessment techniques such as Net Promoter Score (NPS) and SERVQUAL, the next step is to understand your Customer Value mix.

Customer Value and Correlated NPS

Highly profitable companies have developed processes to look at their customer mix as an income statement.  When assessing the true profitability of your entire customer mix (allocating marketing, sales, commissions, field service, customer service, call center transactions, and other allocations), as with many things in life, the 80/20 rule generally applies – 80% of your company’s profitability comes from 20% of your customers.  The key word here is ‘profitable’.  After conducting a Customer Value Analysis for a large insurance client, company executives were shocked to learn that their highest sales customer was only a break-even profit performer.  Insight from this analysis provided strategies CRM and service strategies to greatly increase the profit from this customer,… and increased their loyalty as well.

(Exhibit 1)

A Customer Value Analysis analyzes 100% of your customers in terms of EBIT (like an Customer Income Statement) and plots customers in a Pareto scatter diagram.   Our analysis show results (Exhibit 1) where 3% of your customers produce 60% of the profit of the company.  That’s a powerful insight, and those are incredibly important customers to keep for life.  However, it gets more interesting.  Over 50% of a company’s customers contribute virtually nothing to the bottom line – it costs as much to acquire, perform, and service these customer’s business as the revenue they produce. And, the final insight: 15% of the customer mix is actually draining money from your company… as much as 25% of EBIT is negatively impacted from customers who are costing much more than they contribute in revenue.

With this insight, a company could begin constructing some strategies and tactics to improve their customers relationships, price to service ratios, and tailored segmentation services…  but hold on.

Let’s “over lay” the Net Promoter Score information to see assess the strength of our customer relationships.

(Exhibit 2)

The Customer Value Analysis correlated with the NPS scoring reveals even more insight – profitable customers who are merely “satisfied” are at risk to defect.

Bizappia analysis indicated of those 25% most profitable customers, almost 20% of them scored a NPS of “7-8”.  In the NPS world, that merely means these customers are satisfied, but generally at risk, susceptible to competitor promotions or other factors.  And, over 50% of the marginal producers of profit scored as Detractors: customers who are openly critical of the company and spreading that news to others.

Those insights, without addressable action, are potentially lethal to company revenue and profit results.  Still not persuaded?

Look at a recent customer satisfaction and NPS analysis of the healthcare insurance industry (Exhibit 3).  Satisfaction scoring of health insurers often score low, with members identifying opaque billing process, poor First Contact Resolution, escalating prices, as some of the underlying issues.  In a Forrester research study of customer experiences with leading health insurers, none received an Overall Customer Experience Index rating of ‘Excellent’ or ‘Good’, and many received a ‘Poor‘ rating.  This scoring alone would cause concern, but when looking at the health insurance industry NPS of only 28%, a CEO would quickly realize that their current customers are not only marginally satisfied, but quite likely speaking poorly about their relationship and experiences with friends and colleagues, and would defect to another provider at first opportunity.  With the recent passing of health care reform, and the greater choice consumers will eventually have in health plan carriers, the data would indicate urgency to focus on member acquisition and retention through greatly improved customer service processes, transparency, and friendlier channel technologies.

(Exhibit 3)

However, armed with these optics, corrective action can be taken to improve the outcomes.  There are a number of key strategies to consider to improve the relationship, and revenue & profit potential, with your customers.

Sustained Shareholder Model

A strategy is only effective if you have a clear picture of how the company should structure, message, operate, measure, and reward to reach success.

For purposes of clear communication enterprise-wide, we propose the company clearly articulate a Sustained Shareholder Model.. a term for a model articulating a strategy for “how do we make money now… and in the future”.  (Exhibit 4)

(Exhibit 4)

This article won’t address each aspect of this model, but in essence, your company has four main ‘perspectives’: Financial, Customer, Process, and Infrastructure.  In order for the company to “win”, you need to design clear financial goals, described as either revenue enhancement or operational efficiency, design sales, marketing, processes and metrics to achieve those goals, and ensure that each person in the company understand their part in goal achievement, and how they are rewarded upon success.

But, wait, what about CRM and Channel tools and technology solutions?  When are we going to talk about that?  Patience.  It is far more important to know why and how to engage, and how to measure an anticipated result.  Simply launching new service channels without a well thought through plan & executive commitment will result in customer frustration, satisfaction erosion… failure.

Reflecting back on the Customer Value Analysis, the main goal:  Improve the level of customer revenue and profitability via the 5 P’s:

• Product                 (quality, value, dependable, accurate)
• Personalization (experience, empathy, caring, preference – have it your way)
• Process                 (ease, simplicity, transparent, feedback)
• Psychological     (appeal to personality, attitude, values, or interests)
• Profit Options     (informed Choice – encouraged channel behavior based on cost)

The prior SERVQUAL and NPS analysis provides useful feedback and information on what customers want, to supplement other sources such as employee and management views, SWOT analysis, and facilitated visioning sessions.   This is where the ‘art’ comes into play.  It is advisable to let the data guide your decisioning process; however, senior executive vision is also important.  Henry Ford infamously declared that (paraphrased) ‘If I asked customers what they wanted in transportation… they would have said faster horses’, and Steve Jobs mirrored that when speaking about iPods and iPhones by saying that ‘customers don’t know what they want until you show it to them’.   And, that is more true regarding new product innovation, but, when it comes to service, listening to the customer is paramount to success.  Of course, this assessment requires finesse, too.  To surprise and delight customers, you don’t ask them, “what can we do to surprise and delight you?, just like you wouldn’t ask your life partner, “what do you want for Valentine’s Day?”….. you won’t find the result you are looking for.

After a careful analysis of the data, a skilled practitioner will propose several strategic initiatives to consider to improve customer relationships and profitable activities.  There will be numerous and varying approaches to consider.  So, how do you decide which ones to approve and engage; and which should be delayed until a later time?

We have found a decision matrix that looks at three dimensions (Strategic Value, Pace, and Economic Benefit) very effective.  Each of the proposed projects, product features, service improvements, or investments are projected in a 2×2 matrix where management teams assess the strategic value of the proposal, how quickly the project can be completed & in market, and the top line economic benefit of the proposal projected in the size of the bubble. (Exhibit 5).

(Exhibit 5)

Initiative proposals in the upper right quadrant are most viable to start immediately, and bottom left quadrant are ones that should be delayed until a later assessment time.  The 2×2 visual aids management in making better informed decisions with measurable results.

After determining which initiatives ‘make the cut’, a prototype and business case is constructed to provide greater levels of certainty around the proposal success, and to create objectives for employees enterprise wide to embrace and accept. (Exhibit 6).  Without clearly articulated goals and accepted individual objectives, any strategy is likely to fail, and provide little feedback from which to learn and improve.  While few companies do so, we recommend that companies leverage tools to ‘continuously’ monitor and measure the true ROI results from business case projections.  Without such measurement, objectives and directly attributable economic results are far more anecdotal and unsubstantiated.

(Exhibit 6)

The business case obviously requires detailed financials of the various technology solutions anticipated to effect positive change.  In our next series, we’ll look at the powerful new social media, contact center, and Business Process Management solutions, that have the potential to greatly improve the relationship with your customer and attain higher levels of loyalty and revenue with them.

Next Article:  Part 3:  Continuing the journey…managing the myriad of customer channels, and focusing on the few, right metrics, to yield profitable, lifetime Customer Relationships.

——-

Craig Lashmet is a partner and president of Bizappia, a consulting firm focused on business process, customer service, and customer loyalty innovation and solution implementations.

OMG! Customer Channel Madness! Getting Strategic About Customer Relationships (Part 1)

It’s 2011, do you know where your customers are?

Do you know what they think about you?

Your customers and prospects are now coming at you for sales and service via — iPhone, Android, tablets, 1000s of Apps, Facebook, LinkedIn, Twitter, IVR, chat, internet knowledge bases, corporate websites, call centers, emails, video collaboration, texting, and yes even that relic channel, the US Mail.   And, companies of all sizes have established contact centers to provide quality service, support, and sales.   In fact, a contact center is really no longer a ‘center’ at all.  It is a virtual melding of multiple hubs of service agents dispersed all over the world, in remote centers or operating from home via VOIP.

CEO’s and heads of strategy, marketing, and sales see huge opportunities (and threats) in the new and evolving channels to connect with their customers.

Contact Center and Operations managers see… chaos.

How on earth do you begin to manage all these disparate and evolving channels, measure your success, motivate and measure your agent’s performance, ensure a quality customer experience, and meet corporate strategic goals and interests?

You need a Plan.   And, it isn’t as easy as saying, “to the Cloud”.

First and foremost, for the moment, stop thinking about you (the budget, the obstacles, the politics, the schedules), and start thinking about the single most important asset to your company:  your customer.

1. Develop a Focus on the Customer

The term CRM ‘customer relationship management’ has become tired and worn.  Yes, everyone gives lip service to customer relationships, satisfaction, loyalty, and retention; but, it’s hard to execute when your senior management are telling you to reduce operating expense, dilute loyalty program benefits, and trim headcount!

It’s important to remember and remind the organization that just a 5% improvement in customer retention can yield 50-100% in company profitability, a tenet from research conducted by Bain & Co’s Fellow, Fredrick Reichheld.

Don’t think 5% could mean that much?  Think of it like a MLB baseball player.  A player hitting .275 is considered a decent, average player, but a player hitting .325 is considered a superstar, commands significant compensation pay, and is held up as “elite” status.  A player that improves their hitting from 27.5% of the time to 32.5% of the time results in huge performance and economic differences.  That’s just a five percent difference.

So, before launching into significant technology upgrades and exploiting new social media channels, you need to know where you are (are you hitting .275 or .325, or even in the game?).

Start with this simple question:

Q:  Can we treat our customers the way we would want to be treated?…. across all the channels of engagement.

Your answers to that will begin the process of strategically approaching your customer relationships and solutions to enhance the interaction with them.

2.  Listen To Your Customer and Assess Your Relationship Status.

Next, begin to construct an analytical understanding of your customer.   Listening to them is paramount to determine the quality of your relationship.

There are many useful techniques to determining the quality of customer relationships, but two approaches provide a solid starting point and ease of administration.

First, a simple question for your customer:  How likely are you to recommend us (your company) to a friend or colleague (on a scale of 1 to 10)?

This is the underpinning question of the Net Promoter Score (NPS), again developed by Fredrick Reichheld of Bain & Co.  The essence of this simple score is that only the customers who score your company at 9 to 10 are truly promoters of your business, and thus have accretive effect to your revenue and profit growth.  Scores of 7 to 8 are viewed as passive and these customers are likely swayed by competitive offerings.  Scores of 6 or less are viewed as detractors – the lower the score the more negative their impact to your company.

NPS is a good ‘top down’ metric to get a barometer of your customer relationship, and is far easier to administer since it’s only one simple, but powerful question.   However, by itself is not enough.

The second customer relationship approach begins to get at the reasons customers buy, and keep buying, your product or service and the various dimensions of their satisfaction.  For this, we implement a modified framework of SERVQUAL, a survey method originally designed by Zeithmami, Parasurmaman, and Berry and has been refined and adapted since it’s inception in the 1980’s.  The objective of this approach is to measure customer satisfaction across five distinct dimensions:

• Reliability – A company’s ability to perform the promised product or service dependably and accurately
• Assurance – The knowledge, competence, and courtesy of employees and their ability to convey trust and confidence
• Tangibles – Physical facilities, equipment, personnel, brand, or other traits that impress the customer
• Responsiveness – Your company’s willingness to help customers and provide prompt service
• Empathy – The level of caring, individualized attention or understanding your company provides its customers.

Survey questions are offered for each of the dimensions, generally on a 1 to 5 scale, and are used to determine the gap between your customers expectations for excellence and their perception of your company’s actual service or value delivered.

The rate for customers responding to surveys is typically low (ranging from 5-40%) due to perceived inconvenience, etc.  However, administration of both NPS and SERVQUAL is far easier today, and with higher response rates, if you use web browser survey tools which make it easy for customers to easily and quickly submit their answers, and compilation of responses a breeze with powerful survey database reporting.  To improve your customer response rate, consider offering some small token of value such as a discount off next purchase, or points added to loyalty programs; but consider this wisely as it may skew the customer’s responses.

Armed with customer perspective analysis, you can continue the journey to assess your company’s ability to improve customer relationships and loyalty.

Coming Up:  Part 2+:  The Roadmap:  Continuing the journey to designing strategic processes & solutions, managing the myriad of customer channels, and focusing on the right metrics, to yield profitable, lifetime Customer Relationships.

Innovation is right in front of you… Can you see it?

You’ve been issued the mandate, “find new innovative ideas, improve your productivity by __% and bottom line savings of $___ in the next 90 days”.

 

How do you find business innovation?

Sometimes innovative ideas and execution greatness can be right in front you and you don’t even recognize it.  A few years ago, The Washington Post published an article about a world renowned violinist, Joshua Bell, who routinely plays to sold out symphony halls at $100+ per seat, and who engaged in a profound experiment.  One Friday morning, he arrived at a busy Washington DC Metro station, dressed casually and sporting a baseball cap, took out his priceless Stradivari violin, and began to play Johann Sebastian Bach’s “Chaconne” from Partitia No. 2, a composition widely considered one of the greatest and more challenging musical pieces ever written, and continued with other great works.  He played for 43 minutes.  What happened?

He was virtually ignored by over 1,000 people without acknowledgement.  Most passed by without even a look.  (You can view a 2 minute summary on this video.)

 

Are there innovative ideas or process improvements right in front of you, and you simply don’t see them?

We recently worked with a client who was confronted with finding ways to improve their delivery process.  Their management quickly pointed out that they had been burned for the past decade with consultants and vendors who had recommended new technologies that would solve their problems, but ultimately ended in failed, large project expenditures.  After conducting an assessment, observing work patterns, and asking a lot of tough questions, we came up with many recommendations and a roadmap to success, some involving new, powerful technologies.  But, the business case supported roadmap was essential.  In fact, the first process to be improved required no technology at all.  We had observed the client’s delivery process and found that by reconfiguring their workspace to optimize inventory storage & access, improved product configuration, and authorization processes, that inventory levels could be greatly reduced, and several labor minutes could be shaved off every transaction.  Those reduced inventories and labor minutes resulted in $3 million of annual bottom line savings, with higher levels of effectiveness, employee satisfaction and productivity.  It has paved the way for higher levels of performance gains through other improved processes and technologies.

Was this innovation?  Absolutely.

They had performed this old process activity for years.  The change was right in front of them all the time.   This success has paved the way for higher levels of performance gains through other improved process and technology proposals.

How do you find innovation?

This question would require hours of conversation, and perhaps a book to be written, but a few pearls of wisdom and experiences are proffered:

Change your Perspective.

It’s easy to make assumptions, and fall into the habit of seeing things the way they’ve always been viewed.  But in this exercise, put yourself in your target audience shoes.  If you want to improve sales or marketing, become the customer.  If you are optimizing product delivery, look at things from user’s perspective.  Would you buy from … you?

Talk to your Customers and Employees

Ask powerful and tough questions to find innovation.  Use a lot of “why”, “how”, and “what if” questions that spark real discourse and exploration.  With employees, you are not seeking to find out what employees do in their job, you want to know where the problems or innovations are.  Ask your employees, “what was the toughest case you’ve worked on?”, or “how did you handle your most difficult customer?”, and “why do you have to ….?”.  On those “why” questions, make sure you drill down on the initial answer, as innovation comes from this type of mining.

Open Your Mind to New Ideas

This business world is under rapid transformation and disruption.  If you have been ‘hunkering down’ for the past few years, you might be amazed at the speed of change and agility of your competitors or other industries that may have innovative ideas for you.  Consider attending a trade show of an unrelated business to observe how those companies are creating products or services for other markets.  Conduct offsite creative sessions with the purpose of exploring fresh ideas or learnings from your teams or customers.  Join some social media platforms to experience new networking and contact media, and engage in various forums where new ideas and critique are offered freely.  And,  consider opening a company specific social media page where customer can offer suggestions, requests, praise, or criticism – a potential goldmine in terms of innovation and loyalty optics.

Get Empirical Data,… Never Stop Measuring

You cannot innovate, nor improve, if you do not have a performance baseline and you do not continuously measure.  The only way you can ascertain a benefit, determine a solid ROI projection, and most importantly, prove any benefits are ultimately attained is through establishing a baseline of performance, building a solid business case to support the change, and continuously measuring and reporting on the progress.

Acknowledge, Encourage, and Reward

As you uncover great performance or innovative ideas, acknowledge those contributors.   Simply promoting their positive activity to your company will have exponential positive productivity effect on those being celebrated, and greatly influence others.

Use BPM Disciplines for Greater Discovery and Communication

Again, more time is required to cover this pearl, but BPM (Business Process Management) offers many powerful techniques to discover process innovation and improvement opportunities.  Beyond discovery, you’ll need to be able to share your vision and plan with a broad set of interested or affected stakeholders; and BPM (and BPM tools) provides the frameworks and language to articulate the opportunity in terms of process, workforce, role, material, governance, and monetary impact.

Certainly these are not an exhaustive list, but hopefully you find some of these ideas worthy of pursuit in your quest for effective innovation.

Like Joshua Bell, the violin virtuoso who played in the DC Metro station, sometimes innovative ideas and execution greatness can be right in front you and you don’t even recognize it.

In the movie, Contact, Jodie Foster’s character, Ellie Arroway, is challenged with deciphering a message sent from Vegan extraterrestrials (…think customers), and is given a hint from her mentor S.R. Hadden.

HADDEN

“Pages and pages of data. Over 63 thousand in all, and on the parameter of each…”

ELLIE

“…alignment symbols, a registration marks, but they don’t line up.”

HADDEN

“Ahh, but they do. If you think like a Vegan. An alien intelligence is going to be more advanced. That means efficiency functioning on multiple levels and in multiple dimensions.

The video reflects this by combining three pages in 3 dimensions… they match up.”

ELLIE

“Yes! Of course. Where’s the primer?”

HADDEN

“You’ll see. Every three dimensional page contains a piece of the primer, there it was all the time, staring you in the face.”

 

There it was all the time, staring you in the face.

….

If you’d like assistance finding innovation, and measurable process improvement in your business, please contact Bizappia, or email us at info@bizappia (dot) com.

 

2011 Enterprise Resolution: Get In Shape… A Smarter Way

Happy New Year!

Each year, most of us find this season is the time to reflect and think about goals for the new year… a healthier life, smarter financial planning, etc.  And, there are no shortage of marketers touting easy solutions to losing weight, exercising, and healthier, wealthier living.

The Well Intended

For people looking to lose weight, despite well intended efforts, and initial success towards a desired goal, it is statistically proven time and again, that most people tend to revert back to old habits, poor diet choices, and reduced exercise until they find themselves back to their former self.

The Delusional

And, then there are those who perhaps were once fit, but have allowed their life behaviors to decline, yet still ‘believe’ that they are healthy.  They look perplexed when their pants no longer fit, or are winded walking up the stairs.

The Achievers

For the few that succeed in achieving their goals, and making an enduring lifestyle behavior change, a few key success criteria are:

1. Setting healthy goals,
2. Consistent, continuous monitoring,
3. Feedback and adjustment,
4. A community of support.

Corporations have been banging this thematic drum for many decades.  “You cannot improve what you don’t measure”, “you can expect what you inspect”, and other popular management truths attributed to many wise advisors (Lord Kelvin, Deming, etc).  And, many methodologies have been introduced and propagated to help companies identify unhealthy operations and implement solutions to improve productivity, efficiency, and effectiveness.   Theory of Constraints, Business Process Reengineering, TQM, BPM, Six Sigma, Lean,…

Surely, with all these impressive methods and certified executors, corporations would have achieved nirvana long ago.

A recent study from MIT Sloan Management found that nearly 60% of all corporate Six Sigma initiatives fail to yield the desired result.  The study found that while corporations may have had initial bursts of success, assessing their progress two year later showed that over half of the hundreds of process improvement initiatives had not attained their desired goal, and had reverted back to declined performance.

The study found that organizations became ‘bogged down’ in data collection and analysis, and were distracted with other business responsibilities.  Key leaders were often reassigned leaving less capable managers to continue the effort; and the study also found a general lack of incentives or performance appraisals tied to the success of process initiatives.

The article continues by positing some valid and commonly cited solutions, among them, ‘executives need to directly participate… not just support these projects’, ‘performance appraisals need to be tied to successful implementation…’, and ‘extended involvement of a (process) improvement expert is required’.

While these recommendations are valuable, we would submit, that’s not good enough.

A Smarter Way

Over the holidays, my daughters politely told me that I was ‘getting flabby’.  While in the mid-life phase, I’ve always been athletic, active…seemingly fit.  Yet, I obviously didn’t notice, (or chose to ignore), that my suits were not fitting well, etc, and rarely, if ever, stepped on a scale.  After a weighing and research for my appropriate weight and BMI, I was easily 25-30 pounds overweight.

Call me ‘Delusional’.

The traditional solution approach would be to start a diet & exercise regimen, and check the weight every week or so.  Desiring not to end up as ‘Well Intended’, I decided to monitor and track my daily calorie intake, specific exercise activity, weight, and other health metrics.  To make the effort easier, I downloaded a free iPhone app, MyFitnessPal (there are other great choices, but this one is amazing).  It is a cloud database app that helps set healthy goals, permits very easy entry of foods consumed (automated calorie and nutrients assigned)  and physical activity (automated calories consumed), provides feedback on progress to the goals, and encouragement to continue making progress. If desired, it is easy to setup a community via Facebook or other social media networks, to provide shared experiences and gain further support to goals attainment.  Information is accessed and edited via smartphone, tablet, or PC via commonly used browsers.

Easy.  Fact-Based.  Responsive.  Supportive…  And, admittedly, addictive to use.

Smarter Way to Get and Sustain Enterprise Performance Improvement

The same approach will work in business for you personally, and your company employees, departments, and enterprises.

Approaches like BPM (business process management, DMAIC (define, measure, analyze, improve, and control), and others provide effective methodologies and tools to help companies identify inefficiencies and improve operations.

But, one pitfall the Sloan MIT study found was that the organization became ‘bogged down’ in data collection.  Companies spend enormous, and we believe unnecessary, amounts of time and money with external consultants and internal analysts to collect (point-in-time, static) data and assemble into spreadsheet analysis (frequent manual consolidation).

Collecting and aggregating data is hard work, requires significant manual effort, and is subject to bias.  A better approach would be to implement a continuous monitoring, cloud data base, activity monitor and feedback system into the workplace that would automate the empirical capture of where workers spend their time, with business process context, personal feedback, aggregate management insight, and the potential to integrate with existing systems.

An even higher level of value would come from all this activity integrated with a community intranet or private social media construct, a BPM Suite, and a Business Case ROI engine to provide management with an effective means of predetermining economic performance outcomes (business case) and the resulting operating and financial results of the initiative (realtime ROI analytics).

The only way to reach sustainable enterprise improvement is to:

1. Establish a true baseline operating performance    (current weight),
2. Analyze and determine goals                                   (desired weight)
3. Implement continuous activity monitoring tools,     (automated data collection)
4. Provide addictive feedback & support group          (reporting and encouragement)

Bizappia assists companies in implementing these type of capabilities to enable empirical baseline performance insight, build predictive financial yield models for projects, and Realtime Goal and ROI Analytics.

BTW:  After 10 days back in the demanding business schedule, I’m actively in fitness regimen and daily monitoring, lost 7.8 lbs, and with the feedback received, feel motivated and inspired to reach and sustain my ideal fitness goals….  Talk to me next year!

The Goal Remains the Same… What is the Goal?

One of the best business books I’ve ever read is The Goal by Eli Goldratt, clearly a forerunner to BPM, Six Sigma, and Lean… and in my humble opinion, remains vibrant and relevant today.   It is still an entertaining and enlightening book, written in the mid ‘80s as a fiction novel about a manufacturing plant operation, re-released every 10 years or so, and required reading at many MBA programs.

I stumbled across this book recently, and much to my surprise, found that eight new chapters were added beyond my original edition, thoroughly enjoyed re-reading this classic… and find so much of it meaningful in our quest for “ongoing process improvement”, and effecting positive cultural change within our organizations.

The Goal, while written about a manufacturing environment, provides useful insights for any type of producer, service, or advisory company.  The book forces the reader to challenge the conventional thinking about productivity, process improvement, and organizational objectives.  Many companies in the past few years have skewed heavily to cost control efforts; however, upon thoughtful analysis, these actions are likely contributing towards unprofitable, and potentially catastrophic, outcomes.

An interesting exercise, central to the book’s theme, is to ask your executives and managers a simple question…

What is the Goal of your company?

That question in itself could yield some interesting answers.  Some may say…

• to repeatedly produce high quality products with near zero defect
• to attain a high level of customer satisfaction and loyalty
• to deliver desirable products and services to customers that exceed expectations
• to create a great organization with high employee loyalty

But the author distills everything down to the essential.  The goal of your company is to make money, now and in the future.   Every decision is rendered from that core conviction.  Making poor decisions (regarding operations, customers, employees, vendors,…) will greatly affect the company’s ability to attain its goal.

From a process perspective, the book introduces three core company-wide measurements, listed in order of importance:

1. Throughput  - The rate at which contribution dollars (real cashflow) are coming into the company.

2. Inventory and Investment  - Everything the company has invested and intends to sell.

3. Operating Expense  - All the money the company spends in order to convert Inventory to Throughput.  This measurement includes all employee time, which is often not factored into manufacturing production floor decisions.

Armed with these three metrics, the book explores the approach to find and improve processes in the company.

1. Identify the process constraints
2. Decide how to Exploit the constrant
3. Subordinate everything to the above decision
4. Elevate the system constraint
5. Go back to Step 1, but do not permit inertia to cause a system constraint

Bizappia has applied this approach and these metrics throughout many process innovation and improvement projects, and can attest to their efficacy.  Of course, there is so much more to achieve the goal and effect change in an organization; however, keeping the ‘eyes on the prize’ focus, and emphasizing continuous monitoring and adjustment will yield powerful results.

There are, and have been, many reviews, opinions, and debates of The Goal; but for sure, it is a provocative read, and provides an opportunity for everyone in a company to reflect on their company’s true mission and their role and ability to shape, influence, and contribute to The Goal.

A Christmas Gift:  For a limited time, if you email Bizappia (email address on this site), we will send you a free e-book copy of this classic.

I think you’ll enjoy discovering answers to the questions, “What is the goal of your company?”, and “Do you have the right measurements to assist you in reaching it?”.

And perhaps just as important…  What is your goal?

2011: The Shift from Efficiency to Effectiveness

The last several years in U.S. and global economies have been brutally challenging and difficult.  The crisis dominoes of real estate, banking, consumer debt, and monetary policy have left companies with bewildering choices to navigate and survive.  Despite the potential negative long term consequences of the Fed’s Quantitative Easing 2, American companies are citing cautious optimism entering 2011, and are making planned adjustments to execute with greater effectiveness.

The recent emphasis within corporate America has been cost control, improved operation processes, improved cashflow & liquidity…. in a word:  Efficiency.   The drastic slowdown of consumer & corporate spending, and the frozen liquidity and investment market left senior management of companies, in nearly every sector, stressing survival and retrenchment strategies.

A New Hope

2011 is soon upon us, and there is a shift towards optimism and growth, albeit with caution.  An October 2010 McKinsey global survey of 639 senior executives suggests that the sentiment and emphasis is changing towards growth and effectiveness.  The survey indicates that executives anticipate more solid visibility and consistency in customer demand, and the new challenges in 2011 will be on 1) Customer Service – meeting increased customer expectations, 2) Talent – attracting and retaining the best, and 3) Regulation – exposure or compliance with growing regulatory oversight (Exhibit 1).

Shifting Priorities

With this apparent shift, companies are indicating an investment in improving customer service processes and solutions, improving the quality of service and products, and faster time-to-market processes for products and services.  That doesn’t mean that companies are no longer focusing on operational efficiencies; to the contrary, “reducing operating costs” remains the top priority cited at 41% of those surveyed.  But, that priority dropped by 20 percentage points compared with “improved customer service” and “faster time-to-market processes”, an increase of 15% and 13% respectively from the perspective over the past three years. (Exhibit 2).

How Prepared are Executives to Meet the Shift?

Given the past several years of managing liquidity, cost control, and ‘hunkering down’, executives in the survey indicate they are feeling exposed in preparing for the new (and welcome) challenges of 2011.  Of the top three challenges cited (global competition, customer service, complex customer demand), less than half of executives surveyed felt they were prepared.  And, there is uncertainty over the underlying cost of components and commodities, the increasing stress of increased regulation, and the ability to find and retain talent. (Exhibit 4).

What to Do Now:

Signs are pointing to a stronger 2011 business demand, and a shifted emphasis towards the effectiveness of profitable growth and customer service & processes. Bizappia’s anecdotal business activity suggests this shift is playing out as we are engaging in more customer service effectiveness, segmentation and demand analysis, and productivity improvement efforts.   The methods in which customers interact with companies are undergoing tremendous changes as well, as iPads, smartphones, social networking,and cloud computing options are introduced into the business process.  However, our prior advice remains sound on translating corporate strategy into action, and preparing for, and executing, new process and technology initiatives.

1. Determine the Value Levers. Identify and confirm the drivers affecting business value across customers, processes, contact centers, supply chains, operations, mobile and stationary workforces.
2. Don’t Rely Solely on Interviews and Assumptions – Establish an empirical Baseline of Performance to augment verbal and observed information.  The only way to establish a solid ROI projection and prove any future benefits are attained is by articulating where you accurately are now.
3. Create Models to Predict Improvement Impact. Model your processes, simulate outcomes and financial impact, and effectively communicate a story line for your planned project.
4. Laser Focus on the Business Case.  Build a clear, time sequenced, financial case identifying where enhancements in productivity efficiency and effectiveness project bottom line benefits, and the necessary Cap/Op expense.  And, socialize the business case to build consensus and sponsorship.
5. Start Small – Pilot the Proposal. Select one to two sites with representative user profile of the larger rollout to test the proposed solution.
6. Measure and Refine the Solution…Forever. Ensure that automated measurements are in place to monitor with precision how workers and the entire solution eco-system (including your customers!) are performing and responding to the change.  And, remember that business case used to justify the effort?  Make sure that you are tracking to the projected benefits and costs… and communicate it in every team meeting.
7. Don’t Skimp on Training, Encouragement, and Rewards. Inculcate the new processes and technology with training.  Reinforce to employees that the system is meant to optimize results across the entire organization.  Consider well thought through incentives to shape desired behaviors and performance goal attainment.  This is the moment of truth…. make sure everyone on the team is prepared and motivated for success.

To learn more about Bizappia, visit our website.

7 Steps to Prevent IT Project Failure

Synopsis:   Business Process and IT projects can raise productivity, quality, and yield significant business benefits, but are often complex, extremely expensive, and fraught with obstacles.  It is wise to approach these projects with a disciplined plan to avoid wasteful investments in technology.

1. Determine the Value Levers. Identify and confirm the drivers affecting business value across processes, contact centers, supply chains, operations, mobile and stationary workforces.
2. Don’t Rely on Interviews and Assumptions – Establish an empirical Baseline of Performance to augment verbal and observed information.  The only way to establish a solid ROI projection and prove any future benefits are attained is by articulating where you accurately are now.
3. Create Models to Predict Improvement Impact.  Engineers & architects build models to predict product performance to avoid costly mistakes.  Business leaders can do the same for their process and IT projects.   There are many factors affecting the impact of a proposed change or new solution.  Today there are many good choices for modeling processes, simulating outcomes, and effectively communicating a story line for your planned project.
4. Laser Focus on the Business Case.  Build a clear, time sequenced, financial case identifying where enhancements in productivity efficiency and effectiveness project bottom line benefits, and the necessary Cap/Op expense.  And, socialize the business case to build consensus and sponsorship.
5. Start Small – Pilot the Proposal. Select one to two sites with representative user profile of the larger rollout to test the proposed solution.
6. Measure and Refine the Solution…Forever. Ensure that automated measurements are in place to monitor with precision how workers and the entire solution eco-system are performing and responding to the change.  And, remember that business case used to justify the effort?  Make sure that you are tracking to the projected benefits and costs… and communicate it in every team meeting.
7. Don’t Skimp on Communication, Training, Encouragement, and Rewards. Inculcate the new processes and technology with training.  Reinforce to employees that the system is meant to optimize results across the entire organization.  Consider well thought through incentives to shape desired behaviors and performance goal attainment.  This is the moment of truth…. make sure everyone on the team is prepared and motivated for success.

The Setting:  Present Day at TypiCo…

The COO appears concerned as he assesses the firms operations.  His company has spent $100 million over four years on a new automated system and international rollout that promised to improve business process execution, customer satisfaction, and reduce cycle times producing a projected break-even in just 30 months.   His team had spent over a year in assessing the worthy solution, two years in customizing and integrating the solution with other existing systems, and another year in the implementation and rollout through the organization.

The results: disappointing.

While senior management were pleased with new mobile tablets issued and reported improved information access, the data they were reviewing wasn’t so rosy.  Feedback from the information workers indicated that it now actually took longer to complete transactions because the solutions hadn’t contemplated local compliance processes and unique process differences across customer segments.  Contact Centers found that customer service professionals were taking two minutes longer per call, and almost 70% of the agents were returning to old habits to meet their service level obligations.  And, the COO lamented there was really no way to know if their $100mm solution investment would ever actually meet their ROI analysis since no department could produce baseline performance metrics to begin with.

Have you heard this story before?  Of course you have.  It’s a common occurrence for business leaders of large service companies with remote and distributed employees.

To effect positive change, you must have a plan, and execute it with discipline.

Marshall the Team and Evaluate the Situation

TypiCo’s COO formed a Task Force to assess the following:

1. How is work processed and where are opportunities to improve?
2. What are the unique business value drivers and rules to address?
3. Where do workers spend their time, and where possible, understand why?
4. What is the workers level of understanding / proficiency with the new solution?
5. What are the levels and sources of mistrust or frustration with the solution?
6. Are we merely automating our old processes…. is there an opportunity to ask why and improve?

 

Don’t Rely on Interviews – Get Actual Baseline

Many research and consulting experts recommend interviewing your employees to get true information, and this is certainly a valuable source of information and revelation. However, many experts claim this is a ‘Fact-Based’ approach.  They are misguided.  When an information worker is interviewed with questions such as, ‘how long does it typically take you to do this function?’, the answer is clearly filtered with multiple biases.  Time Motion studies are valuable, but are only a single point in time view, and again, when information workers are aware they are being observed, results are often skewed positive; but performance is unsustainable once the observers are gone.  Our studies show a short 5% improvement of productivity is realized merely when a worker is simply aware they are being observed; but is unsustainable when the spotlight is off or measured over the long run.

The TypiCo COO chose to augment verbal questioning and visual observations by deploying Activity Monitoring tools to capture actual time usage, correlate the time with assigned costs (labor, infrastructure, materials…), and analyze activity patterns & aggregate costs by information worker class.  The aim of this exercise was to establish a BASELINE of current activity, process performance with associated costs.

 

Model the Impact of Change – Process Simulation and a Sharp Business Case Perspective

During the Task Force’s discovery sessions, they compiled a catalog of constraints and business drivers, and this information along with the empirical data from the activity monitoring was fed into a process modeler and simulation tool.  Process simulations help to identify the bottlenecks and impact of workforce and workflow conditions.  With this Baseline of operating data, the COO could now begin to analyze where and how to improve performance outcome.

With the baseline of operating data and modeled hypotheses of improved work processes and desired behaviors, the COO next constructed a Business Case to champion support for the effort.  The Case captured where automation and manual process improvements would enhance productivity, service levels, and forecast the top and bottom line benefits, as well as what changes in working processes would be needed to realize the yield.  With the Business Case in hand, the COO now could socialize the plan to build consensus and buy-in from his colleagues and stakeholders.

 

Start Small: Prove the Improvement Hypothesis with a Pilot

We often hear ‘Think Big-Bold Ideas’, and often are worthy exercises.  But, when it comes to $100mm projects, it is a good idea to test out the ideas in practice on a small pilot group before running full steam ahead.

The TypiCo COO chose two pilot sites with 30 information workers across six distinct persona roles in order to test the process and technology assumptions in actual work settings.  This representative sample universe provided a manageable environment with prompt feedback to make improvement adjustments where necessary, and a more confident outcome upon larger production rollout.

Measure and Refine the Solution…  Forever.

No one is perfect.  No plan is perfect; nor, company execution.

But, each can get better with appropriate and continuous feedback, acknowledgement, and action.

As a result of this approach, TypiCo was able to implement the process and system improvements in half the time as the prior failing implementation, productivity increased by 20%, customer service levels improved by 12%, and several million dollars of annual costs saving were recognized, and proven, through continuous, automated monitoring and tracking to the original business case.

It is only through a disciplined approach that success may be attained.  Before you consider your next significant technology investment, make sure there are clearly understood and aligned processes, rules, baseline performance metrics prior to the effort and continuous ROI metrics after the implementation, and the outcome has a much higher chance of success.

Where can your business execution possibly go wrong?

Ok Go’s Rube Goldberg inspired video. Amazing.

However, I couldn’t help watching this video and thinking how it mirrors much of what still passes for company execution and business process management today. The CEO announces a corporate strategy, goals and incentives filter down, and the company mobilizes talent to produce high quality products/services, promotes and generates demand, sells and transacts with markets, provides high touch customer service via numerous and evolving channels, and hopefully attains a sustainable and profitable business ecosystem.

Where could things possibly go wrong?

How fragile are your company processes?

Did you model your processes, only to have them sit on the shelf?
Can you identify areas of improvement and translate into bottom line – take to the bank savings?
Can you PROVE it?

If you’d like to learn how to ensure “the ball” gets to the finish line, Bizappia is interested in chatting with you.

Don’t Hope for ROI… KNOW!

Ever presented an ROI analysis to support an important IT project or business initiative?

Ever had senior management reply, “How (and When) are you going to produce those returns?”, or “I don’t believe your analysis”.

That is the norm in Corporate America.

Sadly, most companies stop looking at a Business Case ROI after a project is approved. Then, it’s simply “forecast and hope”.

Stroll through this video deck illustrating an effective approach to building a Business Case. More importantly, how to monitor Realtime ROI and comparison to the forecast Business Case.

The power of Realtime ROI is the ability to KNOW 24/7, which benefit areas (or processes) are underperforming, where to take action, and prove IRR, Cash flow impact, and become a learning, continuous improvement company.

To learn more, visit our website at Bizappia.

the next big thing… Realtime ROI Analytics

Businesses often build Business Case ROI projections to justify their operational improvement or IT projects.
Q: What percentage of those companies KNOW what their real return on investment is on their capital appropriations?
A: Less than 1%

Q: How many of the largest companies in the world actually go back and attempt to measure benefits attributed to projects after implementation?
A: Less than 40%

Q: Is there a way to track actual Goal Attainment and ROI – continuously, in real time?
A: Yes, Bizappia has the solutions to help you attain true operational performance and ROI attainment tracking – Realtime ROI Analytics.

Learn more by clicking here.