‘Chain’ beats ‘Triangle’

chain-beats-triangleFollowers of ‘Modern’ (?) management find themselves in essentially the same position: Trying to increase value1 to their investors. But, if this is their outlook, where to start?

Introducing the Triangle

Perhaps the place where ‘the triangle’ is seen most visibly is within many a traditional project management book – you will likely see a lovely little diagram within its first few foundational pages, with the words ‘quality’, ‘cost’ and ‘time’ at its points.

triangleIt will go on to suggest that the Project Manager’s job is to juggle these three variables so as to deliver ‘on time, within budget and to an acceptable quality’.

The key thing to notice is the assumption that there is an equation in which these variable are somehow related….and received wisdom goes on to suggest that there is a trade off and ‘we can’t have it all’ e.g. if we want higher quality then this would sacrifice time and/or cost.

…and the thinking behind that triangle isn’t limited to projects…it goes right across the organisation, in everything it does – basically that faster and cheaper are the opposite of higher quality.

All makes sense doesn’t it – nothing to see here. Blog post over?

Well no, as you’ve probably guessed, I’m just revving up!

And so to Dr Deming:

In his book ‘Out of the Crisis’ (1982)Dr W. Edwards Deming wrote about the “folklore…that quality and productivity are incompatible: that you can’t have both. A manager will usually tell you that it is either or. In his experience, if he pushes quality, he falls behind in production. If he pushes production, his quality suffers. This will be his experience when he knows not what quality is nor how to achieve it.”

Deming’s last line suggests that there could be value in exploring:

  • What ‘quality’ means; and
  • His thinking on how to achieve it.

What is quality?

It’s obvious isn’t it? Surely, it’s simply “how good something is!” Well, yes…but that doesn’t get us very far. It poses the rather obvious question “good for who?”

There are two levels to drill into:


Level 1 (and perhaps you’ll all be yawning reading this much-stated point) is that quality is, and can only be, defined by ‘the customer’ (or citizen or patient or….).

It follows that you can’t tell your customers what quality is, or quietly determine this for them. Instead, if you really want to deliver ‘quality’, you’d better spend time constantly understanding2 your customers and what they want/ need from your product/ service/process.


Level 2 is that there is no such thing as the average customer – no two customers are the same – and, as such, quality is defined by each unique customer…and this point has profound implications (particularly for service organisations).

For example, it would be a mistake to create a ‘customer specification’ and think that you have solved the quality conundrum. We need to understand the particular customer before us and design a system that can effectively, and efficiently, absorb their variety. This would be the opposite of trying to force them into a straight jacket.

“You’ve ‘dissed’ the triangle…but what’s your ‘Chain’ got to do with it?”

And so to Deming’s thinking on how to achieve quality. I’ll start by introducing his ‘quality chain reaction’:

Deming wrote that, in the post World War 2 period, some Japanese companies observed that “improvement of quality begets naturally and inevitably improvement of productivity.” i.e. that when quality goes up, costs actually come down. This would seem to be the opposite of our triangle!

How can this be so? Well, when the quality goes up, costs decrease due to fewer mistakes, less rework, fewer delays…reduced failure demand…and on and on. This leads to a continually improving flow.

Deming went on to write that the following “chain reaction was on the blackboard of every meeting within top management in Japan from July 1950 onwards:”

Improve quality – costs decrease – productivity improves – capture market (better quality, lower prices) – stay in business – provide jobs…and more jobs.

Notice where it ends – jobs. Contrast this with where most cost-cutting ‘initiatives’ start – jobs…but not to create them!

Deming calls out a difference in thinking3:

“Western Industry is satisfied to improve quality to a level where visible figures may shed doubt about the economic benefit of further improvement. As someone enquired, ‘how low may we go in quality without losing customers?’ This question packs a mountain of misunderstanding into a few choice words. It is typical of management’s misunderstanding in America.

In contrast, the Japanese go right ahead and improve the process without regard to figures. They thus improve productivity, decrease costs, and capture the market.” (Deming)

‘Triangle’ thinking requires a detailed business case, showing a healthy (yet imaginary) ‘return on investment’ (ROI) before anything can gain authorisation to proceed. This is, unhelpfully, labelled as ‘governance’.

‘Chain reaction’ thinking uses a clear vision, for the customer, and gets on with constantly experimenting towards it, whilst checking the results. This generates a purpose-seeking learning organisation.

Updating the Quality chain

Dan Jones, in one of his YouTube videos, expands Deming’s quality chain reaction to show its wider effect on the full organisational system4. I really liked what he had done on his slide…but I wanted to make it clearer still…and so I ‘tweaked it’ (see below5)…showing that, if you start at quality, the chain reaction is kicked off and then continues to flow around and around the system:

quality-chain-reaction

Now, many a command-and-control organisation would look at the above and shout out “that’s exactly what we are doing!”…and so, to counter this riposte, I thought I’d re-do the diagram but this time start at cost.

i.e. if your starting point is to reduce costs (usually by interrogating line items on the P&L, and focusing on activities) then you are NOT on the quality chain reaction. You would be on quite a different journey:

activity-cost-spiral

In a sentence:

Customer Purpose (which, by definition, means quality) comes first…which then delivers growth and profitability, and NOT the other way around!

…and, for all you executives/ senior managers out there, many (most!) of your people already know this6.

Footnotes

1. The definition of Value: I reflect on a rather nice quote from Jeffrey Liker: “The first question…is always: ‘What does the customer want from this process?’ This defines value.

Unfortunately, the modern corporate world has somewhat twisted this definition, and has come to believe that value is defined by the providers of ‘dead money’.

2. Understanding your customer: This requires much more than simply asking them what they want/ need. They often don’t know or, even if they do, can’t (or won’t) clearly articulate this. We need to listen to, and observe, the demands that they place on the system…and then we can truly understand how they behave.

3. Deming’s ‘Western/ American vs. Japanese’ comparison reflects the age, and focus, that he was operating within. Times have changed – not all Western/ American organisations can be tarred with the same brush…and not all Japanese organisations have stayed true to this thinking.

I suggest a modern interpretation would be to compare how organisations are run, by:

  • Command-and-Control ‘financial engineers’, attempting to use remote-control management; with
  • ‘Systems thinking’ value stream managers

4. Dan Jones presentation: See his slide with the heading ‘defining value’

5. Value for investors: I’ve added employees to the ‘value to investors’ column label within the diagram, to reiterate my recommendation that the system needs ’live moneyto enable this way of thinking.

6. A common aim: The production worker in Japan, as anywhere else in the world, always knew about this chain reaction; also that defects and faults that get into the hands of customers lose the market and cost him his job.

Once management in Japan adopted the chain reaction, everyone there from 1950 onward had one common aim, namely, quality.

With no lenders nor stockbrokers to press for dividends, this effort became an undivided bond between management and production workers.” (Deming)

I know that it’s a broken record but…this last sentence returns back to “Your Money or your Life!”

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“You keep saying that…but what does it mean?!”

what-does-it-meanSo I recently had a most excellent conversation with a comrade.

I’d written some guff in the usual way and he wanted to push back on it…great! I need to be challenged on my thinking, particularly the more I verbalise (and therefore risk believing) it.

His push back:

I’d used the ‘absorb variety’ [in customer demand] phrase yet again…and he (quite rightly) said “but what does it mean?”

He went on to say that, whilst he understands and agrees with a great deal of what I write about, he doesn’t fully agree with this bit. He has reservations.

So we got into a discussion about his critique, which goes something like this:

“I agree that we should be customer focused, but…‘absorb their variety’???

You can’t do anything for everybody….they’d start asking for the world…you’d go out of business! There have to be rules as to what we will or won’t do.”

He gave an example:

“If a customer asked you to fax them their documents [e.g. invoice, contract, policy…], surely you’d say no because this is such old technology and it doesn’t make sense for people to use it anymore.”

Yep, a very fair view point to hold…and an example to play with.

So, in discussing his critique, I expanded on what I mean when using the ‘absorb variety’ phrase. Here’s the gist of that conversation:

First, be clear as to what business you are in

Taking the “you can’t do anything for everybody” concern: I agree…which is why any business (and value stream within) should be clear up-front on its (true) purpose.

However, such a purpose should be written in terms of the customer and their need. This is important – it liberates the system from the ‘how’, rather than dictating method. It allows flexibility and experimentation.

Clarification: ‘liberating’ doesn’t mean allowing anything – it means a clear and unconstrained focus on the purpose (the ‘why’ for the system in question). If you don’t have a clear aim then you don’t have a system!

Understanding the customer: who they are, what they need.

fredOkay, so the purpose is set, but each customer that comes before us is different (whether we like this or not). The generic purpose may be the same, but what works best for each unique customer and their specific situation will have nuances.

On ‘unique’: A service organisation (or value stream within) may serve many customers, but a customer only buys one service – their need. We need to see the world through their eyes.

“The customer comes in customer-shaped” (John Seddon)

Let’s take the scenario of an insurer handling a house burglary, with some contents stolen and property damage from the break-in.

The customer purpose of ‘help me recover from my loss’ is generic yet focused…it clearly narrows down what the value stream is about.

But, at the risk of stereotyping, here’s some potential customer nuances:

  • Fred1 is an old person that lives at home alone. He’s very upset and concerned about his security going forward;
  • Hilary is a really busy person and just wants the repair work done to a high quality, with little involvement required from her;
  • Manuel2 doesn’t speak English very well;
  • Theresa is currently away from the country (a neighbour notified the police);
  • ….and the variety goes on and on and on3

Each of these customers needs to recover from their loss…but the specifics of what matters differ and these can be VERY important to them.

If we (are ‘allowed’ by our management system4 to) make the effort up-front to (genuinely) understand the customer and their specific unit of demand, and then work out how best to meet their needs then they are going to be very happy…and so are we…AND we will handle their need efficiently.

If we don’t understand them and, instead, try to force them into a transaction orientated strait-jacket, we can expect:

…adding significant and un-necessary costs and damaging our reputation.  Not a great place to work either!

Do what is ‘reasonable’ for them

Right, so you may agree that we should understand a customer and their reality…but I still hear the critique that we can’t do anything and everything for them, even if it could be argued as fitting within the purpose of the value stream in question.

So let’s consider the ‘what’s reasonable?’ question. ‘Reasonable’ is judged by society, NOT by your current constraints. Just because your current system conditions5 mean that you can’t do it doesn’t make it unreasonable!

computer-says-noA test: if you (were allowed to actually) listen to the customer, understand the sense in their situation and the reasonableness of their need…but respond with “computer says no” (or such like) then your value stream isn’t designed to absorb variety.

And so we get to what it means to design a system that can absorb variety.

It doesn’t mean that we design a hugely complicated system that tries to predict every eventuality and respond to it. This would be impossible and a huge waste.

It means to design a system that is flexible and focuses on flow, not scale. This will be achieved by putting the power in the hands of the front-line worker, whilst providing them with, and allowing them to pull, what they need to satisfy each customer and their nominal value. This is the opposite of front-line ‘order takers’ coupled to back-office specialised transaction-oriented sweat shops.

How does that ‘fax request’ example sit with the above? Well, on its own, I don’t know…and that’s the point! I’d like to know why the customer wants it by fax.

  • perhaps they aren’t in their normal environment (e.g. they are on holiday in the middle of nowhere) and the only thing available to them is some old fax machine;
  • perhaps they didn’t know that we can now email them something;
  • perhaps they don’t (currently) trust other forms of communication…and we’d do well to understand why this is so;
  • perhaps, perhaps perhaps…

Each scenario is worthy of us understanding them, and trying to be reasonably flexible.

Forget all that!

take-a-lookOf course the above means virtually nothing.

You’d need to see the variety in your system for yourself to believe, and understand, it…and the way to do that would be to listen and see how your current system DOESN’T absorb variety.

How would you do that? Well, from listening to the customer:

  • in every unit of failure demand;
  • within each formal complaint made to you;
  • …and from every informal criticism made ‘about you’ (such as on social media)

I’ve got absolutely no idea what you would find! But do you?

 The funny thing is…

…if we allow front-line/ value-creating workers to truly care about, and serve each customer – as individuals – in the absence of ‘management controls’ that constrain this intent (e.g. activity targets) then:

  • the ‘work’ becomes truly inspiring for the workers, ‘we’ (the workers) gain a clear purpose with which we can personally agree with and passionately get behind;
  • we become engaged in wanting to work together to improve how we satisfy demand, for the good of current and future customers; and
  • the ‘management controls’ aren’t needed!

If I asked you, as a human being:

  • do you primarily care about, say, a ‘7 day turn-around target’? (other than to please management/ get a bonus)

vs.

  • do you really want to help Fred (or Hilary, Manuel, Theresa…) resolve their specific needs and get back on with their lives?

…how would you answer?

We need to move away from what makes sense to the attempted industrial production of service delivery to what makes sense in the real worlds of the likes of Fred.

Footnotes

1. Fred: The picture of Fred comes from a most excellent blog post written by Think Purpose some time ago. This post really nicely explains about the importance of understanding customer variety in a health care setting.

2. Manuel: A tribute to the late Andrew Sach (a.k.a Manuel from Fawlty Towers) who died recently. He wasn’t very good at English…

que

3. Variety in service demand: I’ve previously written about Professor Frances Frei’s classification of five types of variety in service demand and, taken together, they highlight the lottery within the units of demand that a service agent is asked to handle.

4. Allowed to: This is not a criticism of front-line workers. Most (if not all) start by wanting to truly help their customers. It is the design of the system that they work within that frustrates (and even prevents) them from doing so.

You show me a bunch of employees and I’ll show you the same bunch that could do awesome things. Whether they do so depends!

5. System Conditions may include structures, policies, procedures, measures, technology, competencies…

6. Bespoke vs. Commoditisation: It has been put to me that there are two types of service offerings. Implied within this is that there are two distinct customer segments: One that wants little or no involvement for a low cost and another that wants, and is willing and able to pay for, a bespoke service.

This is, for me, far too simplistic and misunderstands customer variety. Staying with the world of insurance…

A single customer might want low involvement when managing their risk (taking out a policy and paying for it, say, ‘online’) but to deal with a human if they need help recovering from a loss (i.e. at claim time).

That same customer may switch between wanting low involvement and the human touch even within a value stream – e.g. happy with low involvement car insurance but wants a human when it comes to their house insurance.

…and even within a given unit of demand, a customer may be happy with low involvement (say registering a claim)…but want the option of a human conversation if certain (unpredictable) scenarios develop.

The point is that we shouldn’t attempt to pigeon-hole customers. We should aim to provide what they need, when they need it…and they will love us for it!

7. Automation: On reading the above, some of you may retort with “Nice ideas…but you’re behind the times ‘Granddad’ – the world has moved to Artificial Intelligence and Robotics”. I wrote about that a bit back: Dilbert says… lets automate everything!

Dilbert says…let’s automate everything!

Dilbert portraitI absolutely love ‘Dilbert’ – it seems to me that Scott Adams, the cartoonist, has seen into our very souls when it comes to our working lives.

You may also love the Dilbert cartoons but what you might not know is that Scott wrote a couple of (let’s call them) ‘essays’ as the introduction to his first Dilbert book1…I read them many years ago and they made me cry with laughter.

I’ve not thought about these for a long time, but they popped into my head recently when I was considering where the world is heading in respect of invention, and specifically automation.

I’d like to reproduce the core parts of one of his comedy essays here, for use in this post (I hope Scott doesn’t mind… this is, after all, a plug for his books 🙂 ). Here goes:

“Theory of Evolution (Summary)

First, there were some amoebas. Deviant amoebas adapted better to the environment, thus becoming monkeys. Then came Total Quality Management. I’m leaving some of the details out…

Anyway, it took many years to get to this lofty level of evolution. That leisurely pace of change was okay because there wasn’t much to do except sit around and hope you didn’t get eaten by wild pigs. Then somebody fell on a sharp stick and the spear was invented. That’s when the trouble started…

I wasn’t there, but I’m willing to bet that some people said the spear would never replace fingernails as the fighting tool of choice…’diversity’ was not celebrated back then, and I expect the ‘Say No to Spear’ people got the ‘point’ if you catch my drift.

The good thing about the spear is that almost everybody could understand it. It had basically one feature: the pointy end. Our brains were fully equipped for this level of complexity. And not just the brains of the intelligentsia either – the common man could find his way around a spear too. Life was good…almost nobody complained about how confusing the spears were….

Suddenly (in evolutionary terms) some deviant went and built the printing press. It was a slippery slope after that. Two blinks later and we’re switching batteries in our laptop computers while streaking through the sky in shiny metal objects in which soft drinks and peanuts are served.

I blame sex and paper for most of our current problems. Here’s my logic:

Only one person in a million is smart enough to invent a printing press. So when society consisted of only a few hundred apelike people living in caves, the odds of one of them being a genius were fairly low. But people kept having sex, and with every moron added to the population, the odds of a deviant smarty-pants slipping through the genetic net got higher and higher, When you’ve got several million people running around having sex all willy-nilly the odds are fairly good that some pregnant ape-mom is going to squat in a field someday and pinch out a printing-press-making deviant.

Once we had printing presses, we were pretty much doomed. Because then, every time a new smart deviant came up with a good idea, it would get written down and shared. Every good idea could be built upon. Civilisation exploded. Technology was born. The complexity of life increased geometrically. Everything got bigger and better. Except our brains.

All the technologies that surround us, all the management theories, all the economic models that predict and guide our behaviours, the science that helps us live to eighty – it’s all created by a tiny percentage of deviant smart people. The rest of us are treading water as fast as we can. The world is too complex for us. Evolution didn’t keep up.

Thanks to the printing press, the deviant smart people managed to capture their genius and communicate it without having to pass it on genetically. Evolution was short circuited. We got knowledge and technology before we got intelligence.

We’re a planet of nearly six billion ninnies living in a civilisation that was designed by a few thousand amazingly smart deviants.”

Oh, there’s so much in there to work with! But, first…

What about you and me?

…I believe that I am reasonably intelligent (don’t we all!) but I’m absolutely certain that I’m not one of the “deviant smarty-pants”. I use a fair bit of technology in my daily life but don’t really know how it works. Sure, I can read Wikipedia like the next ape and spout out that it’s all about 0’s and 1’s…but that doesn’t mean that I really ‘get it’.

Now, I don’t mean to be rude, but the vast majority of you reading this aren’t likely to be geniuses either…and if you are, then please consider our predicament and look after us 🙂

…and so, to automation:

With reference to Scott Adam’s evolution theory, I often feel like we have become a bunch of idiots within our world, and each fresh automation added to our environment likely makes this more so.

There appears to be a large push for the likes of robotics and artificial intelligence at the moment, with lots of super positive articles being written by ‘interested parties’.

I reckon that we would be wise to ponder the automation thing and to have a healthy regard to what it implies. This isn’t to be a luddite2 and try to hold back the tide of change. It is suggesting that we fully think through what it means, across a broad context, and not be easily persuaded by some futuristic promise of bliss (which we should constantly reflect is mainly coming from those selling it).

(By way of context: this post was triggered by a recent article in respect of a fatal accident involving Tesla’s semi-autonomous car. and a discussion with work colleagues)

The calculator as one of the simplest of examples:

Many years ago I trained to be a Maths teacher, along with a good mate called Dave.

We used to have a laugh whenever we asked one of our students how they had arrived at a particular answer and they would simply reply that “I worked it out with my calculator Sir”.

We did the usual “back in my day” lament about kids not knowing how to do simple arithmetic on a piece of paper and becoming reliant on a calculator instead.

Now, you might respond with “yeah, but why do they need to learn all that stuff if they’ve got a calculator!”…and, mainly, I’d see your point.

The problem comes when they accidentally miss-key into their wonder machine, get a result and blindly rely on it.

If you don’t understand the basics of what’s going on, then you can’t be expected to spot an error (often in our inputs or usage). How could you?

To the world of work:

To take the calculator example, and turn it into a generalisation: You can’t truly cope with a defect (or failure demand), let alone improve the system that created it, if you don’t understand what’s actually going on.

If we are going to automate things, then I’d suggest a few automation design principles should be used…such as:

  • it must be very obvious to the people utilising the automation as to what is actually happening (i.e. this is not hidden or over-complicated);
  • it must be possible, and easy, to take back control and experience the task for ourselves; and
  • taking back control (i.e. ‘switching to manual’) is encouraged…and even required on a regular basis.

This may add initially to any automation endeavour, but should pay itself back handsomely when in operation, by our understanding of (and retention of control over) what is actually taking place.

(I note Toyota’s thinking in respect of automation: i.e. automation may prove useful, but it isn’t the objective and could be a hindrance.)

Humanity, and customers:

Going back to that ape thing: Given that we are basically a bunch of “ninnies”, we should design accordingly.

My criticism of many (most?) automation efforts is that they are aimed at efficiency.

Our true purpose should be effectiveness, and that requires us to fully appreciate our customers, and their* (wildly varying) ape-like humanity.

(* again, I don’t exclude myself from this)

Every attempt at efficiency, say through pushing the likes of contact centre IVRs, self-service portals and ‘chat-bots’3 onto customers, is hugely wasteful and counter-productive if they aren’t effective (which means valuable for the customer, for their needs)

We should be pulling innovative ideas on the basis of clear value for our customers.

So, I suggest that the first automation design principle should be that the customer (a human being) would want it!

 …and, as a bonus for reading this far:

I share the following thought-provoking cartoon4 :

auto cars

Footnotes

1. Scott Adam’s book is called ‘The Dilbert Principle’ and was first published in 1996.

2. Being a Luddite: A clarification for all you early adopter ‘technologists’ out there. This post isn’t an attempt at denial. It is (hopefully) to provide some healthy self-reflection when putting forward the next hugely optimistic article on what’s coming to take over our worlds :);

3. Chat bots: I found this recent BBC article somewhat illuminating, particularly IKEA and ‘Anna’. “In the beginning, we tried to impersonate a person, and we found that there was no reason to do that”. This speaks volumes to me. By causing a confusion to the human as to ‘what’ they are interacting with, we create an unnecessary and yet fundamental problem.

4. Credit: This cartoon was found by a colleague. Thanks 🙂

 

 

There’s no such thing as…

internal customerThis post is a bit ‘tongue in cheek’ (so if you don’t agree 100% then please don’t take it too much to heart 🙂 ) but it expresses what I’ve thought for years now.

A business fashion started back in, oooh, probably the 1980s – talking about ‘internal customers’ within organisations. The idea being that you are the customer for the person upstream from you – they are producing for you – and, in turn, the person downstream from you is your customer…and on and on…in a long chain from the start to the finish of a value stream. Lots of lovely internal customers.

But here’s the thing: They aren’t your customer – they are a part of (i.e. colleagues within) your system!

Yes, yes, I know that you are reliant on them and then the next lot are in turn reliant on you…but that’s just because of the design of the (current) method.

And, yes, yes, I know that it would be jolly nice if you all worked together in really efficient and effective ways – but that doesn’t make for a customer relationship. Further, it can be harmful to think in this way.

What is a customer?

I’ll draw on a set of related quotes to assist me here:

“The purpose of a business is to create a customer.”1 (Peter Drucker)

“It is not the employer who pays the wages. Employers only handle the money. It is the customer who pays the wages.” (Henry Ford)

“There is only one boss. The customer. And he can fire everybody in the company from the chairman down simply by spending his money somewhere else.” (Sam Walton)

The point being that a customer is, by definition, external to the system. Everyone and everything within the system is (or should be) there for them.

Without the (true) customer, there is nothing.

Why does this ‘internal customer’ label bother me so?

Such ‘internal customer’ logic causes us to think that we must do what they ask, and not question them too much, along the lines of the ‘customer is always right’ and ‘give the customer what they want’ mantras.

It presents a suboptimal ‘them’ and ‘us’ situation rather than a collaborative horizontal (across the system) ‘we’.

Once you think in terms of internal customers, it’s only a short and painful step towards the dreaded ‘Service Level Agreement’ (SLA) game show. Grrrr.

A massive risk within the ‘internal customer’ logic is the creation of a static system, one in which the method (and targets) becomes defined in quick drying cement.

  • If I think of you as my customer, then there’s unlikely to be much challenge from me as to whether your role should change, or even exist…and you sure as hell aren’t going to appreciate any such line of reasoning from me – who the hell am I to suggest this – you are my customer, I am merely your supplier!
  • Further, as my customer, you may consider that you know best, that your wish should be my command and that I should be grateful to be of service to you. Indeed, you may even score me on how well I treat you. Ouch!

How many of you reading this post have been asked to do something by your ‘internal customer’ and thought that what they were asking for was nuts…and how many of you didn’t get the chance to meaningfully discuss this with them, and had to carry it out anyway?

Even worse, how many of you have switched off from even thinking about whether your internal customer’s request makes sense and have merely become ‘order takers’.

What a load of nonsense. Let’s just throw the ‘internal customer‘ language in the bin.

“But what about treating all our colleagues with respect?!”

I can almost hear some HR departments chiding my thinking as being disrespectful to my fellow employees. No, it’s not!

In fact, it’s the opposite. I think it’s disingenuous for me to pretend that my work colleagues are my customer. They are far far more than that – we are reliant on each other, to keep our jobs, to grow ourselves, to stimulate each other, to want to come to work…to spend our working lives delivering something meaningful to this world. This is soooo much more than being merely thought of as ‘internal customers’.

As colleagues, we need a robust relationship, not one of diffidence and servitude. We need to respectfully challenge each other, work hard to listen to and understand each other’s worldviews…and become better, closer and wiser for this.

We are not ‘internal customers’, we are colleagues.

Addendum:

I always pick a trusted colleague (from an ever widening group of ‘pioneers’) to have a read of my posts before I press publish. I was particularly nervous about this one as I felt that it could just be me ranting about an ‘issue I have with the world’ (again 🙂 ).

…but I got a great response back, with the following gem (thanks A):

“Are the All Blacks ‘customers’ to one another, or are they a team with a shared purpose? By using the term ‘customer’ where it doesn’t belong… it distracts us from understanding who our real customers are.”

This made me giggle. Turning to the wonderful game of rugby, I had visions of the ‘backs’ telling the ‘forwards’ that they are their customers…I don’t think that this would go down too well.

rugby positionsHow about the following, even dafter rugby situations:

  • the jumper in the line-out considering themselves as the customer of the hooker throwing the ball in;
  • the winger considering themselves as the customer of the no. 10, who is kicking the ball through for them to get on the end of; or, at its simplest
  • the potential receiver considering themselves as the customer of the possible passer of the ball.

What a load of guff! They’re a team that have to work together, as equals; that have to understand, and swiftly react, to what’s around them; that have to make the selfless pass or tackle; and that have to pick each other up and genuinely offer words of support when perhaps it doesn’t go quite as desired.

They are not ‘internal customers’, they are team mates.

And so, to complete the title of this post: There’s no such thing as ‘internal customers’

Footnote:

1. I’m not a massive fan of this particular Peter Drucker quote, but it fits for this post.

Why so? Unfortunately, businesses have become far too adept at creating customers and, as a result, we have rampant consumerism.

I reflect on Professor Tim Jackson (author of ‘Prosperity without Growth’) clearly calling out THE problem for humanity, and what we* might do about it (* requiring brilliant political leadership).

His take-away quote “The story about us – people being persuaded to spend money we don’t have on things we don’t need to create impressions that won’t last on people we don’t care about.” Prof. Tim Jackson TED talk.

So why can’t we do that?!

tesla-factoryI don’t know about you but ever since I was a kid I have loved watching short videos of manufacturing plants and staring in wonder at how the products we take for granted actually get made! It all seems so futuristic and alien.

Here’s a short (4 mins) yet amazing video showing the mind-boggling production of TESLA Model S cars over in Fremont, California.

What do you notice? Here’s what I see:

  • a large, high volume manufacturing plant;
  • an ultra clean and tidy environment;
  • ordered, smooth flow through specialised process steps;
  • consistency of operation and velocity;
  • substantial mechanisation & automation;
  • calm and assured humans working alongside the machines;
  • …with a high quality product coming out the end.

Sounds fantastic, I’ll have some of that!

…so why is it that service organisations don’t seem to get anywhere near the awesomeness that is modern day manufacturing?

Here’s the answer…..because they try to copy manufacturing!

“Hey, that doesn’t make sense…”

Surely (I hear you say) if manufacturing is sooo advanced from the times of Henry Ford and through Taiichi Ohno’s Toyota Production System, then service organisations should be studying what they have done and applying it to their world?

And, indeed, that is what many (most) service organisations have done. But, in doing so, they have spectacularly missed a crucial point: Service is different to manufacturing and therefore they have been ‘solving the wrong problem’.

Here’s a fundamental John Seddon quote with regards to service:

“Service differs from manufacturing. There is inherently more variety in customer demand….Whilst the Toyota method was developed to solve the problem of how to produce vehicles at the rate of customer demand, in service organisations the problem is how to design the system to absorb variety.”

Going back to the TESLA factory, notice how each car being made is essentially the same. Now I know that there is some variety – different colours, different engines, different trim levels – but it is basically the same (modular) product. I also know that Taiichi Ohno’s Toyota Production System brilliantly worked out methods to deliver this limited variety within the one production process (as opposed to requiring separate lines).

Much of manufacturing has adopted the mantra of ‘specialise, standardise, centralise and then automate’….but this is just about the opposite of what would be good for a customer requiring their very specific needs to be met for a service.

Let’s carry on with the car example but move on down the process to the service end – the selling, distribution and servicing of the car.

Let’s assume that TESLA’s competitor, TRAGIC, has applied the manufacturing mantra to their car service processes.

TRAGIC has created a centralised and highly automated ‘contact centre’ and separate ‘service centre’, both of which are broken up into highly specialised teams with standardised processes.

  • you will be directed to a website on which it is nigh on impossible to find out what you need to know, let alone a way of contacting a human being for a conversation;
  • …assuming you do find a contact number, you will then be punished by a multi-layered IVR that doesn’t have an option that meets your specific need;
  • you will have a standardised ‘scripted’ conversation with someone who doesn’t seem to be allowed to help you with your actual needs…but who can transfer you to [insert name of another department here];
  • you will then be passed around a number of specialised departments as they all ‘pass the parcel’;
  • you will be allocated to a ‘back office’ work queue and will have to repeat everything you have said so far to whomever is allocated your ‘ticket’…and they will likely disagree with whatever the person before them said to you along the lines of “oh no, I only do this” or “no, they don’t know what they are talking about, we can’t do that for you”;
  • you will talk with people who have a standard time slot allocated to you (or at least an ‘average handling time’ target), who will ask you standardised questions, categorise you according to limited drop-down boxes in their computer and then allocate you to defined ‘solutions’;
  • you will be confused as to who is actually dealing with you (or who even cares);
  • you will spend time and effort chasing up what is happening;
  • you will be provided with a standardised solution which either doesn’t meet (or only partially meets) your needs;
  • ….you will be forced through the whole sorry process again (and perhaps again) as you struggle to get your actual need resolved.

The Point:

In service, the customer comes in ‘customer shaped’. Our job is to design the system so that it can absorb their variety, not frustrate it.

Beware the manufacturing mantra of ‘specialise, standardise, centralise and then automate’.

Toyota and automation: I know that the TESLA factory looks like it’s been taken over by intelligent robots…but don’t get too carried away with automation in manufacturing. It’s worth noting that:

  • Studies have shown Toyota factories to be significantly more efficient than their competitors despite being less automated;
  • Toyota is wary of ‘over automation’ and has been reported to be reducing/ removing some automation in preference to human beings carrying out the work.

Their rationale? Putting to one side the enormous cost of developing, buying, installing and maintaining robotics, a robot simply does what it is programmed to do. Contrast this with a human that can think about the process they are performing and continually look for ways to improve it.

This can be the difference between static and dynamic processes…but of course this is only relevant if the human is in an environment that motivates them to continually improve what they do.

A Service Revolution!

RevolutionService is different to manufacturing…and this difference is gob-smackingly important for a service organisation to understand if it is to truly move towards its (stated) customer purpose.

I was recently passed a link to a Malcolm Gladwell TED talk by a colleague and whilst watching it I thought…

“Nice! This is a simple tie-in to the incredibly important concept of variety in customer demand.”

So here’s the link to the very watchable talk (18 mins): Choice, happiness and spaghetti

Here’s the key points from the talk:

  • that Howard Moskowitz (a psychophysicist) had his ‘aha moment’ that “they had been looking for the perfect pickle…but they should have been looking for the perfect pickles“;  
  • the false assumption that the way to find out about what people want is to ask them….leading to years of fruitless and misleading focus groups. The truth is that:
    • people commonly don’t actually know, or cannot (and even will not) express, what they want; and
    • they will be constrained by what they currently know. No customer asked for an automobile. We have horses: what could be better.” (Deming)  
  • the importance of horizontal rather than hierarchical thinking about customer demand: we thought that customer demand was hierarchical (from cheap up to expensive products or services). Instead, there are only different kinds of products and services that suit different kinds of people;
  • that, instead of looking for one way to treat all of us, we now understand the importance of variability;
  • when we pursue universal truths [one standardised product/ service/ way of doing things], we aren’t just making an error, we are actually doing our customers a massive disservice;
  • We need to embrace the diversity of human beings

Hang on a minute….

So, I started off this post by saying that service is different to manufacturing but Gladwell uses lots of examples of physical products in his TED talk to make his point about the importance of customer variety (cola, pickle, spaghetti sauce, coffee,)…“make your mind up Steve!”

Well, this is a nice segue to explain about two types of variation, and how incredibly important this understanding should be to a service organisation (or the service part of any value stream).

These two types of variety are:

  • Customer-introduced (i.e. within their demand); and
  • Internally created within the process (regarding flow)

To go back to Gladwell’s spaghetti sauce: Different consumers like different sauces (this is variety in demand) but, once they have determined which variety of sauce they like, they then expect each jar they buy to be the same week in, week out (i.e. minimal variation in the process that creates that sauce).

So, whilst we definitely want to reduce and remove variation in the quality of the process, we should not remove the ability of the process to provide a suitably varied experience and outcome. Rather, it is the opposite – we should be trying to cater for this variety.

In fact, variety in service is MUCH bigger than Gladwell’s product examples:

One of my earlier posts set out five categories of variety in customer demand, as identified by Professor Frances Frei (see The Spice of Life).

Now, whilst it might be useful to categorise service variation (purely to help you ‘see’), the bigger point is that the customer sets the nominal value – the specific value of a service to them.

“The customer comes in customer shaped

…there is virtually infinite variety in people….and that variety can change for a given person depending on, say, time of day/ external influences/ mood….

Standardisation is NOT the answer…in fact, it is often the problem:

There are legions of service organisations that have hired manufacturing improvement experts (or people who have read books about them) to ‘standardise, specialise, centralise and automate’ because they say “this is the solution”.

Examples at attempts to standardise the customer include:

  • using IVRs to standardise customers into categories (“press 1, then press 3…”);
  • using call scripts to standardise the content of customer conversations;
  • using average handling times to standardise the length of a conversation;
  • using ‘box ticking’ forms to standardise customer information collection;
  • using ‘black and white’ rules above common sense, when dealing with a customer’s needs;
  • forcing customers down one path (e.g. you can only pay by direct debit, you can only interact online, you can only use these suppliers, …….and on and on).
  • …..

Interestingly, if you read the list above with your ‘I am a customer’ hat on, you will likely recall many instances where you have tried interacting with a service organisation and one or many of the above attempts at standardising you and your demand has seriously frustrated you!

This leads to much failure demand, waste (and cost) but with little value delivered (as written about in an earlier post).

Clarification: this isn’t to say that technology cannot assist or that there is no place for any standards. It’s making the point that the starting point should be that:

“….in service organisations, the problem is how to design the system to absorb variety” [and not frustrate it]. (Seddon)

Our starting point always seems to be ‘efficiency’ and a focus on activity cost. Perverse as it may seem, a focus on activity cost often has the unintended consequence of increasing total cost (though this is not visible to a silo’d organisation and is nigh on impossible for them to measure).

If we standardise, say, a site visit (the activity) such that it can’t absorb the variety in the customer’s demand…then don’t be surprised that:

  • there is failure demand from the customer when they complain and/or disagree with the outcome of the visit;
  • there is much ‘expert’ time spent reviewing this complaint;
  • there are yet more site visits required to resolve the problems;
  • there is lots more paperwork/ computer inputting/ workflow management required;
  • there is much confusion created by all this extra work (who did what when, who authorised what change from the standard, who is explaining all this jumble to the customer?); and
  • trust has been lost with the customer who now questions everything we do

The most important point to note is that “cost is in flow, not in activity”

So why the title of this post?

Well, the above is quite different thinking to where ‘command and control’ service organisations have been going. A revolution if you will.

Put simply, if we understand the variety in our customer demand and try to design our system to absorb (rather than frustrate) it we will go a long way towards our customer purpose…with the likely side effect of doing so for less cost.

“Managing value [for the customer] drives out cost….Focussing on cost paradoxically adds cost and harms value.” (Seddon)

Have I got a deal for you!

usedcarsalesmanWhich industry are we really suspicious about, and is the butt of jokes around the world? How about the car salesman?

So why do you think we are so suspicious?

Here’s what we might experience:

  • A rather smooth operator who appears to ask you about what you want but, surprise surprise, “has exactly what you are after”…which, funnily enough, happens to be what he’s got in stock!
  • A personal business card handed over, encouraging you to give him a call whenever you want…but use his direct number: “remember me, my name’s Jim”;
  • Some desperate moves from Jim as you attempt to leave his car yard, saying things like “I can only offer you this fabulous deal today”;
  • …but when you have left the yard, multiple calls from Jim asking how you are getting on and saying that things have changed for the better…so come on by so that we can discuss “…and remember to ask for Jim”;
  • …and if you ring back for Jim but he isn’t available, his ‘colleague’ Bob gladly (yet slyly) takes over the deal, perhaps saying “nah, no need to tell Jim, I can handle it from here!”;
  • Strong attempts to ‘sell you some extras’ like finance, warranty, a tow bar and so on…even when you’ve made clear that you really don’t want them;
  • Assurances that “yes, don’t worry about it – everything works…and if, in the unlikely event you have a problem, just bring it back in and we’ll sort it”;
  • …and if you end up making a purchase, some strange ‘paperwork’ going on to make the deal look a certain way:
    • perhaps trying to bring it forward or put it back (end of the week/ month/ year);
    • perhaps trying to play around with how the figures look

….you might be able to add a whole heap more experiences to the above!

Actually, car salesmen are nothing compared to big financial services business. Let’s move across to the UK Financial sector and have a look at the carnage of the last few decades:

  • the 1988 – 1994 Personal Pension miss-selling scandal in which salespeople on commission persuaded vast numbers of people to trade in generous and safe(r) company pensions for riskier and costlier alternatives. The resultant compensation scheme forced on the industry involved the review of 1.7 million consumers, over 1 million compensation payouts and a total cost to the financial companies involved of £12 billion; (Source of figures here)

  • the 1990s and 2000’s Payment Protection Insurance (PPI) miss-selling scandal in which banks and other financial institutions offered sales incentives to increase the take up of payment protection insurance…which led to a range of miss-selling practises including: putting pressure on customers to buy it in order to secure a loan; failing to make it clear that it was optional; selling to people who were actually ineligible; and even adding it to a loan without the customers consent or knowledge. The resultant compensation scheme forced on the industry (spot the pattern?!) saw the ombudsman receiving “5,000 complaints a week” and payouts being made of more than £15 billion. (Source of figures here)

  • …and on and on (the Endowment Mortgage miss-selling scandal, the Credit Card Protection insurance miss-selling scandal….)

They all shared the same ‘miss-selling’ credentials

  • aggressive, ignorant or incompetent sales tactics,
  • a failure to appropriately advise customers, and
  • deliberate strategies to sell financial services that customers do not need;

So, what’s the common ingredient?

Well, that would be the offering of sales incentives (contingent rewards).

The point is that, if you offer sales incentives, you can virtually guarantee that you will cause dysfunctional behaviour that goes against your (stated) ‘customer’ purpose.

Remember that a valid purpose statement should say something about “helping people…” It does not say “sell what you can to them”. We need to remind ourselves about a system and that ‘sales’ is but one component of it.

If you offer sales incentives, you can expect the system to ‘bite back’ in the form of undesirable discounts and terms given, failure demands from customers contacting you again, cancellations, complaints, debt collection costs, returns and after service costs… all of which will be un-measurable back to your brilliant sales incentive scheme.

You can of course try to put in place ‘compliance’ controls to monitor all these ‘side effects’ but a) you won’t catch the majority of them and b) this is just an additional (and expensive) layer of costs, and waste.

The sobering thing about the UK financial service miss-selling scandals is that the eventual costs dwarfed the original supposed sales benefits! What a huge waste.

If you offer sales incentives, you can expect:

  • people to try to sell what they have in front of them, rather than what the customer wants, or actually needs;
  • a strong desire to ‘get the sale’ and ‘move on’ to the next ‘lead’ meaning that less care is taken explaining the product and what it is and isn’t;
  • ‘dodgy sales’ made, which should never have occurred (i.e. were inappropriate and/or were not desired)

If these incentives are to individuals, you can expect reduced co-operation between ‘colleagues’, who are now in competition for those elusive sales…even leading to sabotage.

Such competition will actually harm, and prevent those many sales that would have occurred because of co-operation between colleagues.

If these incentives are for particular products, you can expect other products to be ignored, and even denigrated in favour of chasing the reward…even if the non-incentivised product was what the customer actually needed.

If you add targets to achieve these incentives, you can expect games to be played:

  • if I am near my target in a given period, I’ll do some creative things to creep over the threshold (perhaps offering discounts and giving things away for free that I shouldn’t be);
  • if I have achieved this period’s target, I might try to defer a sale to my next period, which, again, may not be what the customer wants and clearly distorts information about demand.

And, given that the customer isn’t daft, they ‘feel’ the sales process as opposed to experiencing someone that actually cares about them…providing an awful experience and a massive (yet missed) hit in reputation.

There’s nothing ‘rocket science’ about the above. We all know and recognise it (it happens to us as customers and we hate it!)…yet many of us still work in management systems that think that sales incentives are a good idea.

An important clarification:

If you think that the bad practices described above are only carried out by a handful of ‘bad people’ then you don’t understand human psychology. In fact, the majority of people are having to play a ‘game of survival’ within their incentivised ‘meet target’ management regime and feeling pretty bad about it too…it certainly doesn’t meet their much talked about personal purposes. You’d have to be a pretty strong person to go against the system…and you might not last long in such an organisation if you do!

It’s not a case of ‘bad people’…it’s a case of ‘good people’ having to work in a ‘bad system’….which brings to mind Deming’s quote:

“A bad system will beat a good person every time.”

To close: Going back to our car salesmen opening, most dealers assume that they won’t shift cars without sales incentives. John Seddon, in his latest book ‘The Whitehall Effect’, refers to a Canadian auto dealership client that:

  • studied their system;
  • revealed the tricks used by the salespeople to make sales and gain the incentives; and then
  • understood the resultant negative impacts on the customer.

They removed sales incentives, set out a customer brochure describing all the industry sales tricks and promised that none applied here. Salespeople now co-operate with each other, customer trust improved, sales went up and long term customer relationships were forged.