Qualtec's Business Performance Improvement Blog

We all hear a lot about corporate governance.  It’s a term that refers broadly to the rules, processes, or laws by which businesses are operated, regulated and controlled.  If you search on Financial, Legal or IT Governance you find a tremendous amount written on the subject.   Since we deal with Operation Excellence, I searched on Operational Governance to see how people were thinking about the organizational structures that drive and support Operational Excellence and business performance improvement.  I was surprised by how so much of the search results dealt with IT and BPM software, and not really what I was looking for.  I can’t help but take this as being a blind spot in how we run our companies.

Through our clients, we see various activities involved in running the business.  We see our clients define their customer, their customer’s needs, how to serve those needs and how to do it better than their competition.  These are their strategic decisions.  When they want to do better, we see our clients define initiatives for improvement.  Within Operations, these initiatives are called Operational Excellence, Continuous Improvement, Six Sigma, Lean Sigma, Quality and many other names.  These are operating activities and they have improved greatly over the last twenty years.

Between the strategic and operational level is where we see the least definition and the greatest variation in practices.  Sometimes we see no activities here at all!  We see improvement projects that bubble up from the bottom and aren’t filtered through any sort of decision matrix.  Other times we see all sorts of pieces including scorecards, dashboard, value streams, process maps, KPI and control charts but they are simply individual activities, reports and discussions.

 a short Powerpoint presentation that walks through an operational excellence roadmap, with notes included.

Bringing this middle ground between the strategic decisions and the day to day performance and improvement activities is where we believe companies have the greatest potential for their next leg of performance growth.  These are management activities that center on operating decisions supported by continuous improvement.

Operational Governance is what we call these activities and when done right you see all the goals being addressed with improvement activities and all the improvement activities tied to goals.  People don’t just know what they are doing, but why they are doing it.  It is effective Operational Governance that turns strategy into results.  For more on Operational Governance see our web site.  And if you’d like to discuss the how to establish an effective Operational Governance system, feel free to contact me.

Service organizations must grow by offering new solutions to customer needs.  The trust needed for a consumer of services to buy a new offering is obviously highly dependent on their perception of the service quality they are experiencing on current services.  If the customer has issues with service delivery on existing services, it is no surprise there will be a lack of confidence in buying new services.  However, service delivery excellence, while critical to successfully expanding new services, is a different capability from service innovation.

Successful service innovation depends on (i) defining unmet VOC for which the customer has not contracted as they currently are doing it themselves or have other vendors doing it and (ii) the ability to design better processes as measured by the customer than the customer or an existing third party provider can design.  Service delivery is about executing against customer expectations on existing contracts and internal processes.    Improving service delivery is about understanding the service provider’s processes.  Succeeding with new services about understanding the customer’s or a third parties processes.

a short overview of our service innovation approach ….

Never assume excellent service delivery ensures the ability to define, design and deliver new services.  In the end, the muscle tissue a service organization builds by improving service delivery will improve perception for new services but not necessarily the ability to define, design and deliver new services or to innovate. Service innovation must be addressed separately from Service delivery.  The upside of building service innovation ability is that if the service provider succeeds it will be able to extend beyond providing existing services.

If you’d like to speak more about this, feel free to contact me.

We’ve been working with a number of customers of late that are trying to improve service delivery processes, and move into the differentiating realm of service innovation.  In these very large enterprises, it’s always a challenge to get organizations to change behavior.  Immediately, voices start rising, touting the need for change management.

This is another of those terms that can have a lot of different meanings to a lot of different people.  Wikipedia defines change management as a structured approach to transitioning individuals, teams, and organizations from a current state to a desired future state. If you google “change management”, you really enter the swamp.   Even if we narrow change management to the business / process improvement world that we at SSQ live in, there is still a lot of confusion.  How do you sort it all out?

our BPM Overview presentation

In the CI world, companies want and need to markedly improve their value-generating processes (value stream), but the question becomes how do you get people to embrace the changes that come as part of improving?  How do we get them to embrace the overall effort to improve processes, and theoretically improve service delivery?  Do we really have to indoctrinate them into some new philosophy of change?

Personally, I don’t think so.  I think that many times change management becomes a problem because people don’t have a clear picture of 3 simple (not really) things:

1. where they are now,
2. where they need to be
3. why they need to get there.

Most organizations have plenty of smart people (I know … there are exceptions!)  .  The fundamental trick to change management really boils down to getting all those smart people pulling in the same direction.   If you can get clarity around the 3 simple things above, you might be surprised to see that change management is not the big issue you thought it was.

I’ve used the term simple to describe these three things above, but getting there can be anything but.  With our engagements, we spend significant time on the front ending trying to get these answers, and I can assure you that it can be challenging.  But, we get there, and I firmly believe our success rates with business improvement efforts are better because of it.

There are other ways I’m sure, but we use a structured approach that attacks the problem by:

1. Understanding, for both the customer (voice of the customer) and the business (voice of the business), what constitutes high-performance and turning that into clearly defined metrics (efficiency and effectiveness).  We are looking for gaps in these indicators, between current state and where we need to be.
2. Understanding the top-level value stream from a process perspective (not function), the things that have to happen to deliver your services or products, and create customer and business value
3. Identifying metrics at the process level (VOP), and making sure they are aligned with top level VOB and VOC (#1).  Like #1, we are looking for the gaps.
4. Defining an objective prioritization scheme based on voice of the customer and voice of the business.
5. Identifying improvement ideas from the gaps, and evaluating and prioritizing those ideas objectively based on #4.  A prioritized project pipeline.
6. Turning high-value project ideas (business cases) into tightly scoped improvement projects that are clearly aligned with very visible objectives (#1)

Of course, this is over simplified. There’s a lot of work happening between the spaces, but think about it and ask … Is change management really as simple as being able to see clearly? As always, I welcome your thoughts on this.  Comment or contact me directly if you prefer.

Capturing Voice of the Customer (VOC) is a critical first step in aligning your product or service delivery organization to the real needs, wants, and desires of your customer. Pretty common sense, right? But, when someone says “I’ve captured the voice of the customer”, what does that really mean?

Any interaction with the customer is an opportunity to capture VOC, but I would argue that a more proactive and structured approach may yield more useful and actionable information from the customer. Understand what’s important, from the customer’s perspective, clearly define it and make it measurable, then measure your performance. Sounds simple, right?

a short module on understanding customer requirements and the Kano Model

Well, not so fast. The relationship between how you perform and what the customer sees as real value is not always simple or direct. Many times, organizations are left utterly bewildered after making some “major” performance improvement only to find that the customer never even noticed! I’ve even seen a case where a business process outsourcer assumed an agreed upon SLA was their VOC, met every single measure in that “VOC”, and then lost the customer! How could this happen? Well, the customer expected them to optimize and improve the process for them, not just run it at current performance levels and meet the SLA. Their ideas of “Value” were very different.

One good way to look at customer requirements is through the lens of the “Kano Model”. Dr. Kano developed a model of the relationship between service or product delivery performance on the one hand, and value as perceived by the customer on the other. It is very simple and can be extremely useful in understanding the relationship between what you do and how that relates to what the customer perceives as value. The model defines 3 categories of customer requirements: basic, performance, and excitement.

Basic. These are the requirements that are just taken for granted. Customers will rarely mention them, because they are just expected. In the airline industry, getting to your destination in one piece is an example of a basic requirement. No matter how well you deliver on basic requirements, your customer will never be more than neutral in terms of satisfaction or perceived value. But fail to deliver one of these requirements and you can bet you’ll have a very dissatisfied customer, one that is likely to be out the door.

Bottom Line: Basic requirements are really only noticed when they aren’t met …..

Performance. These are the things that customers want, but don’t necessarily expect in all cases. They are the things that usually make up a service level agreement (SLA). Performance characteristics include faster service, lower cost, higher reliability, etc. They are usually stated by the customer, in some detail, and meeting them will drive customer satisfaction to some degree, and sales. But they do not guarantee customer loyalty (e.g. earlier example of business process outsourcer that lost customer after meeting SLA).

Bottom Line: Meeting performance requirements will drive near term customer satisfaction and sales, but will not guarantee customer loyalty.

Excitement (Wow). Excitement attributes are unspoken and mostly unexpected by customers but can result in extremely high levels of customer satisfaction and loyalty. Their absence doesn’t lead to overt dissatisfaction. Excitement attributes often satisfy latent needs – real needs of which customers are currently unaware. In an ultra-competitive marketplace where multiple vendors’ offerings provide similar levels of performance, delivering on excitement attributes that address “unknown needs” can provide a competitive advantage.

Bottom Line: Delivering on Excitement attributes drives customer satisfaction, new sales, and and customer loyalty. It enables the charging of a premium for goods and services.

One final thing to keep in mind is that this is a moving target. Today’s wow factors will soon become just basic requirements. Think about what was a “wow” factor on a mobile phone just a few years ago, and where things are today. Don’t sit still. Getting VOC is never a one-and-done.

Feel free to contact me directly to discuss how you might improve your efforts to capture voice of the customer (VOC).

For service organizations seeking to grow, excellent service delivery of existing offerings instills trust with the customer. That trust is the cornerstone to successfully launching new services. But the goodwill of that trust can only be leveraged if new service offerings provide NEW value. And excellence in what you do doesn’t guarantee providing that new value. To put it another way, doing something well for someone doesn’t mean you will add value in everything new you can think of or be asked to do for them in the future.
What is common between delivering on current services and new services is the ability to execute. What is different is that the Voice-of-the-Customer (VOC) is well defined in the former case and has yet to be defined in the latter. Defining VOC well is a function of listening well. Execution and listening are critical to both situations. Execution has the same definition in both cases. But the two situations call for two different types of listening.

How does the listening differ? Well, in Service Delivery the target had been acquired at the time of the sale. Therefore, you are listening to determine if you are hitting the target and, if not, how you’re missing and by how much.  In the case of new service design, you are trying to acquire the target. When delivering existing services, customer requirements are well known and VOC must be collected on how well you are performing vis a vis those requirements. With new services, you are more heavily involved in defining customer requirements.

a short training module that discusses Critical to Customer Requirements

Too often, I see companies launch new services with confidence based on their ability to stay tuned to a specific target and hit it consistently only to fail with a new service launch. The reason they failed is that they never properly defined the new target. Staying on a target and finding a new target are really very different.

For Service Delivery, the primary “listening” or “targeting” challenge is how to (i) monitor VOC and (ii) convert VOC to Critical to Quality. To launch new services, the primary “listening” or “targeting” challenge is to define the value to be delivered per the customer or define Critical to Customer Requirements.

In the end, service delivery VOC is about how to understand your processes while the VOC needed to successfully launch new services is about understanding the customer’s unexpressed needs.

If you would like to discuss, contact me directly.

Verizon Wireless “Can you hear me now?” commercials hit home because in our increasingly mobile connected lives we live that moment so many times. Verizon’s implicit message is that not only will you be heard on their network but that they hear you.  We all want to be heard and we are frustrated when ignored.

We live that moment when we question whether we are being heard in many other ways including as consumers and business customers.    How often do we feel as if we are asking the people from whom we buy goods and services both personally and professionally “Can you hear me now?”  How often do we feel as if we are ignored, misunderstood or altogether treated like a dropped call!  What do we do when we feel that way?  I know what I do.  I move to another network.  I move to one that will listen to me.

Let’s now reverse the question.  As a product or service provider, ow well do we listen?  Are we so busy with what we wish to accomplish that we are forget our goal in business, which is to meet client or customer requirements.  I recently heard an individual involved in a performance improvement program discussing the need for Voice of the Customer, VOC, as he explained his management scorecard and projects.  When asked if he’d reviewed either with a major customer, he replied that they’d given him a scorecard but he’d neither used it or presented his because his system was still immature.  I took a double-take.  He’d been handed the VOC he sought but failed to realize it as such as he was focused on his ability to execute.  Tell me – would a hunter increase the amount of venison he had for the winter if he could shoot straight but couldn’t find his quarry?  I think he’d have a cold, hungry winter. Good VOC helps your business see the target.

a short training module that discusses Critical to Customer Requirements

If you want to judge the ability to execute, we have lots of qualitative observations and quantitative measures with which to make an assessment.  Do you have the same so as to assess your ability to listen?   Do you know whether or not you are really listening to the voice of the customer?  We feel that just as there is a maturity model for the ability to execute improvement, there is a maturity model for the ability to listen.  If you’d like to hear more and discuss how you listen to your customer, please contact me.  We always like to listen to you.

It sounds so simple. Lean eliminates waste defined as any activity that does not provide value to the customer. Eliminate the waste and you will bring products and services to customers better, faster and at a lower price. Finally, combine it with Six Sigma to reduce variation and defects, and you make breakthrough results.

We all start by understanding that value is defined solely by what the customer actually desires and for which they are willing to pay and that value enabling activities, while not adding direct value, are necessary. We all then look for the true non-value added activities that add waste in the form of unnecessary time, effort or cost. We learn to seek and eliminate those non-value added activities.  That is the essence of a lean project.

So what is the lynchpin that makes this elegant equation work? Identify what your customer considers of value and how you deliver it. Once you have that line of site, if you maintain efforts to continually improve, you’ll get there. But without that clarity, your improvement efforts are a march to nowhere.

It is important when developing that line of sight to define value from the perspective of the customer, the Voice of the Customer (VOC). Understand clearly and exactly what product or service the customer desires, when it is to be delivered, and at what price.

Download a training module dealing with Critical to Customer Requirements, a key element of VOC

To understand how your company actually delivers what the customer considers of value, leverage lean tools to precisely map the set and sequence of all specific actions done to bring the product or service from conception to final delivery. This provides a visual display of exactly how a particular process is carried out. Mapping this “value stream” enables you to identify value-adding and non-value adding activities from the customer’s perspective thus setting the stage for improvement.

Along with providing a sense of alignment between your goal of delivering value and your opportunity for improvement, this exercise also carries the message of how problems and solutions are cross-functional in nature. If process owners participate in this process with an open mind, they will learn the futility of looking for a solution from someone else independent of their efforts. Thus, not only does value stream mapping provide alignment from the customer to performance improvement opportunities, but it continues through to an individual’s actions.

Yes it can be a simple equation – understand what your customer values (VOC), eliminate waste (Lean) and be more competitive. But to do that, make sure you get the front end right using VOC and value stream mapping to get the target and alignment to individual actions.

Feel free to contact me if you’d like to discuss ….

For many companies, CI has has moved from a top-down strategic initiative to tactical activities focused on specific business problems

I’ve written several articles that talked about how views on business process and performance improvement have changed over the last 3 years.   In the personal development world, there is a mantra that basically says that meaningful change comes only when the pain of not changing becomes greater than the pain associated with change. 

The economic downturn definitely created the pain that caused a lot of companies to change the way they look at their business, and at process and continuous improvement.  I see very few companies saying they want to launch a top-down, enterprise wide Six Sigma (or Lean or BPM) initiative, especially ones that focuses on investing big $’s on training and infrastructure up front.   Those days, for the most part, seem to be over and gone.  Certainly a big change from years past, but is it a bad thing?  

Some purists might argue that it is a bad thing, that top-down, large scale change management and process improvement initiatives should be a fundamental part of any enterprise.  Theoretically, yes, but how many large-scale Six Sigma (or Lean or BPM) initiatives basically collapsed under their own weight in years past, after a great deal of money, time, and intellectual capital was spent?   A great many, I can assure you.  Why?   Well, I might argue that it’s because they took on a front-and-center life of their own, as initiatives, growing unbounded for the sake of the initiative when their place should have been in supporting the core value-generating processes of the business. 

a short guide to project selection and definition.

I would argue that the change is not a bad thing, and was necessary to survive in this new normal.  Let’s think about where are we now?   Companies are lean and mean, operating in very much of a do-more-with-less mindset.  For many, big Six Sigma (or Lean or BPM) organizations have been disbanded.  Productivity is at record levels.  60 hour + work weeks are the norm for many.  But, you can only ask so much of your people for so long.   Sooner or later the business processes have to be looked at, right?  

But, now, what I see is that many organizations are taking a very pragmatic and tactical approach to CI.  The competitive environment, the regulatory environment, or maybe even a very important customer is telling them EXACTLY where process problems are, and they are listening.  They then focus like a laser beam by identifying and rigorously defining good projects (see a recent article I wrote on the elements of good project definition) that solve real, specific business problems.  They then develop the process improvement skills in-house or work with a specialist partner to execute what are, by definition, high-impact improvement projects. No guesswork, no unnecessary overhead, no unnecessary infrastructure.   

In essence, what I see is a fundamental shift from CI initiatives that are pushed into the enterprise to an environment where CI and process improvement are pulled in, as specifically needed by the business.  Of course, the pendulum has swung very far from the strategic to the tactical and the optimum is probably somewhere in the middle.  But, was this change a bad thing?   I think not.  I think it will serve to refocus CI on what really matters …. making the business more competitive and profitable in an ever-changing marketplace.

Feel free to contact me directly.  I’d like to hear your thoughts ….

Outwit…Outplay…Outlast.  Wow, that says it all doesn’t it?  Reality TV is a kick. Throw a bunch of strangers onto an island and watch them dwindle down based on how well they can play to the desires of a group in a winner-take-all battle. Lots to learn from watching. How well and quickly can a player understand the group’s requirements? How well can they meet those requirements in a highly competitive situation? Each elimination changes the group’s dymanics so the requirements, competition and strategy all have to be adapted continuously and quickly. One slip up and you could be out. How does this relate to Service Industries?

 our critical to customer requirements VOC module

In previous articles, I’ve discussed how business and consumer patterns have gone through massive changes and how understanding the Voice of the Customer is the key to adapting to the new environment. The nascent recovery is providing an opportunity to survive and, for some businesses, to flourish. But the competition is still in the elimination phase and I believe that is very much the case for service businesses of nearly every nature.

It’s important to understand why things are different in services so as not to be lulled by more macroeconomic headlines. Before the crises, manufacturing went through years of driving productivity while services accelerated right up to the edge. The Federal Reserve’s strategy of depreciating the dollar and growing demand in emerging markets has helped the global competitive position and demand for manufacturing products while services are more tied to the domestic economy. Finally, we have a political environment that ramped regulation or restructured entire service industries such as banking and health care. And if that weren’t enough, services are going to be the start-ups of all the unemployed as they require less capital and can use the internet to gather and distribute information, the very essence of a services business, at a very low cost.

Change is not over in service businesses. Like Survivor, listening and adapting quickly to an ever changing customer is still the only protection from elimination. Several key points we consider imperative to driving alignment are:

1. However you capture VOC, keep improving it. We propose a five level maturity model that goes from what you need to simply stay alive to what you need to be innovative.
2. Balance how you respond to VOC with how you respond to other stakeholder demands. We have a checklist of behaviors that will give you the ammunition to point to an imbalance.
3. Segment your VOC. Meeting every item your customer sets out for you will not yield a purchase while some will yield tremendous results. We offer a framework for segmentation.
4. Convert what you hear to something you can measure. To make science out of art we use industry case studies and benchmarking as the best guide.
5. Align process metrics to the chosen customer measures in #4 above. Again, use industry benchmarking and cases to apply knowledge and experience and avoid the alchemy.

Now you are ready to drive change. But there is one more thing. Let’s return to the scenario painted at the start of this article…it’s not enough to just do this. You must do it fast. We are rebounding but demand for services isn’t returning to 2006 levels…at least not until around 2016…and competition is increasing. During that time, businesses will fail, be acquired or be rationalized. But there will also be winners and, like Survivor, they will win big. We urge you to recognize what is coming and act.  Outwit…Outplay…Outlast. 

If any of the pieces above would help you, let me know our thoughts.

Your company’s or business unit’s results are ticking up. Many of your processes need improvement to deal with the increased activity layered on a rationalized capability. But your pre-recession centralized group was taken away with the tide or one never existed. And your organization is still holding a lid on any personnel additions as it finally enjoys the fruits of painful decisions and remains concerned about the myriad of external factors threatening a nascent recovery. You are left wondering how to unravel Gordian’s Knot. The Alexandrian solution is to build a self-sustaining model that integrates CI into every day activities.

We propose three elements to a self sustaining model which are as follows:

• Find True North. What is it that your organization needs the most? Is your organization looking to solve a customer matter? Must your organization continue to find efficiencies to remain competitive? Whatever it is, find it and stay on it by making it visible and clear to everyone. The reason is simple. Organizations often used a centralized CI program to push improvement efforts. If you find True North, you won’t have to push improvement efforts. They will be pulled.
• Keep it simple. As you look to take on improvement activities, keep the challenges simple. Use basic tools and techniques to knock down the easy barriers and drive a “pay-as-you-go” model that yields traction. Often a centralized improvement group is there to maintain momentum. Our discussion here isn’t against a centralized effort as much as it is against having to wait for one before you can move forward. We’d argue that as successes and improvements yield returns, go back to a funded centralized improvement effort to take on the chronic, cross-functional challenges that require a higher level of expertise, full time devotion, cross functional latitude and can power through momentum killing barriers. But for now, avoid making momentum a challenge.
• Integrate rewards. If you want it to be broad based, make the rewards broad based and commensurate with the effort. Members of centralized groups are motivated to drive improvement because they have skin in the game. They pursue significant improvement, are measured on achieving it and rewarded if they accomplish their goals. Is it any wonder they are focused on improvement? To get broad efforts to yield results, take a broad view of rewarding success. Now we aren’t saying to weight such reward systems such that everyone becomes an improvement professional. The reward should match the effort and return.

our whitepaper that discusses using BPM and scorecards to align improvement efforts

Every day we talk to people in all functional areas of organizations wrestling with the question of how to move their effectiveness and efficiency forward in the new environment. They see feel the pain and see the potential reward. But they are frustrated that they don’t have a centralized group which to call and ask for help. They feel locked in place unable to move forward.

Our advice is to find a different solution than what you have considered to be “normal” in the past. Let your organization’s mission pull activity. Pursue simple, well targeted improvements that provide their own momentum. Integrate a broad based reward system that recognizes peoples’ accomplishments on a level commensurate with their efforts. Cut the knot! 

If you would like to discuss these ideas, feel free to contact me.