Enter – shared-services organizations.  A shared services organization (SSO) can theoretically consolidate support operations into a single organizational unit and substantially improve operating efficiencies by eliminating duplication and excess overhead, and streamlining and standardizing processes.  The SSO should be able to deliver a substantially better service at a substantially lower cost.  It should be a center of both value creation and cost reduction for the enterprise.  If it can’t do this, you have to ask … what’s the point?

In concept, establishing a well-functioning, value-delivering SSO sounds really simple. BUT, reality says not so fast.  I work with companies every day, and it’s a very rare event (and that’s generous) for me to hear someone say their internal shared service organizations deliver the highest-quality, while being the lowest cost provider of services.  Why is this?  Optimized internal SSOs should be able consolidate, standardize, and optimize known best practices for the enterprise, right?  They should be able to align with the strategic direction and goals of the company, and orient service levels towards improving customer experience, right?   I mean, they’re part of the enterprise, so they should be able to do these things at least as well and an external provider of the service, right?

There’s more to good shared services organizations than just consolidating people and systems …

Often times, it does seem that a shared services organization was built simply by throwing together people and systems from different areas and groups.  All I can say is good luck with this approach.  In reality, it requires a change in mindset and an increased focus on the overall business, and a hard look at the processes that are really needed to drive the business. No more living in that isolated black box.  Successful SSO’s integrate aligned and continually optimizing processes with right-fit people, information, and technology automation to deliver a totally new level of capabilities.

 a short powerpoint overview of Lean in Services Operations …

  a example approach to applying lean at an operations level …

• Understand the value stream, end-to-end, from both the customer AND the producer perspective.  You can’t optimize what you don’t understand.
• Establish meaningful and actionable service and process metrics that serve all customers of the service.  Make the metrics visible.
• Focus on driving efficiency by eliminating wasteful, non-value-add steps and unnecessary complexity — from supplier, producer, and the consumer of the service.
• Constant focus on customer experience, alignment, and process improvement.  Well-executed, targeted Kaizen events can deliver improvements in weeks or days, not months or years.  And, those improvements positively impact all customers of the service.

There are many other examples, but the point is that if you’re looking for a place from which to pull significant additional value, then you may need to look no further than then enterprise’s shared services organizations.  And Lean may be a powerful and extremely cost-effective tool to apply.  As always, feel free to contact me directly if you’d like to discuss in more detail.

A natural path many disciplined thinkers follow for any improvement of any type is to thoroughly understand the total system before embarking on improvement.  But within Service Operations the complexities are so great that to thoroughly understand the system requires so much time and investment that the business gives up on the effort before ever getting improvement activities that yield results off the ground.  This is made even more challenging because of the tight resource constraints we face in this economic environment and the demands of ever more discriminating customers.  As in all businesses these days, Service Operations must do more with less.

Our proposed philosophies at a deployment level, about which we have written often, are things like pulling capability development at the rate the business needs it, building foundational capabilities broadly before developing advanced capability, paying for new capability development by providing hard returns on investments as they are made, and aligning resources and efforts to business and customer metrics (i.e. things that really matter).

 a short Powerpoint discussing Lean in Service Operations …

We take these philosophies down to a project execution level by building an understanding of the project problem solving roadmap and moving back and forth between tools to validate project assumptions while using a lot of tollgates so as to invest time wisely.  Use a problem statement and simple SIPOC to define goals, owners, team members and the process. Take that to tollgate to ensure alignment before moving to deep process characterization.  Use the SIPOC’s process column to do a preliminary value stream with some simple time and quality assumptions and conduct a tollgate review before moving to functional flow charts or collecting data.  Do a simple fishbone diagram to validate the demographics of the data before moving to a more detailed FMEA or creating a data measurement system.   And constantly validate the business case and alignment.

The point is that the need to use resources wisely and drive change counter intuitively means we should take many smaller steps rather than looking for the big steps.  The complexity and immaturity of the system makes the understanding of the overall system too expensive and the success of a big, top down project too low a probability.   Keep this in mind when trying to deploy Lean in a services operation, and your chances of success improve greatly.

If you would like to discuss any of these points, feel free to contact me .

One of the challenges that I keep seeing is that companies try to do Lean Manufacturing in a services environment.   Let me be blunt … if you think you can blindly copy the tools of Lean manufacturing in a services environment, you’re setting yourself up for failure.  We see this happen when manufacturing companies that have had great success with Lean in the production operation try to take their Lean manufacturing experts and approaches and leverage them to roll out Lean in services operations.  These people may indeed be Lean manufacturing specialists with great knowledge, but this doesn’t mean they can effectively roll out Lean in non-manufacturing aspects of the business.  In most cases, it doesn’t work.  The same thing happens when services companies hire a Lean manufacturing expert to help them.  It just doesn’t work.  Why?   Because Lean in a services operation is just different, that’s why.

this powerpoint overview of Lean in a Services environment …

Now, we could dive right in and start looking at a lot of individual tools and see which ones fit well in a services environment and which ones don’t.  But, I think the better approach is to take a step back and look at the differences from a business perspective first, then come back and start talking about tools and approaches.  So, here are some of my thoughts on how a services environment is different, and these difference most certainly impact the way Lean should be rolled out.  I encourage our readers to chime in with their own ideas.

• There is typically greater involvement of customers in the production process. In many cases, the customer is a supplier to the process.  Sometimes the involvement is so ingrained in the process that you really end up with co-production with the customer.
• Since services processes are often very people-centric (vs. machine-centric), it is very difficult to get to real standardization.
• Quality is an experience, not just a measurement against specifications.  The inability to standardize the process makes it very difficult to standardize quality.  The customer’s definition of quality is a perception, subjective vs. objective
• There is much less visibility to what is happening.  Information is flowing, not product, and that information can be digital, paper, or even verbal.  And, HOW it flows often has little or no standardization
• IT systems play a much bigger role.  They enable the process, but can also be a rigid constraint on the process.   There may be multiple and often un-integrated systems.  Workarounds persist in the form of excel spreadsheets, word docs, etc
• WIP and inventory are often hidden and ignored, but they are there and can have the same negative impacts as in a manufacturing environment (e.g. wasted resources, longer lead times, more variation

These are just a few of the key distinctions, and there are many more.  But they do point out some fundamental differences in manufacturing and non-manufacturing operations.  The differences are so stark that common sense should tell you that you cannot roll out Lean in a services operation the same way you do it in a manufacturing operation, not if you want to see results, and our experience here at Qualtec backs that up.

This is but the first in a series of articles we’ll publish on this.  I invite your thoughts, comments and feedback.  Feel free to contact me if you’d like to discuss.

This prioritization is essential to avoid the quicksand that can consume a QMS in record time if not kept in check. According to the book The Goal, the goal of a business is to make money, all of the rhetoric and altruistic arguments aside, your business is there to make money – SO START THERE!  

In your QMS, start with those processes that are essential to your business system.  I have heard that in a QMS you should classify every process that touches the customer as a core process.  If we follow the logic that the customer is the one that casts their dollar vote and grows our business, then this completely makes sense.  However, I say we also need to look at processes that cost us money as core to our business (i.e. warranty) and make sure those are core.

As a general rule anything over 6 CORE processes means that you have failed to segregate and prioritize. As a rough list in a manufacturing or service system I see the following as being relevant and a point to kick off a discussion

1. Customer Management- has a direct effect on the bottom line, number of customers, demographics of customers, retention of customers….ALL AFFECT GROSS REVENUE
2. Product/ Service Planning- Simple mistakes at this phase can have your pricing all out of whack, or signing up to quality requirements that you just do not understand and may not be achievable
3. Project Management- Slippage in a program may result in increased costs and dissatisfaction
4. Realization- A fancy way of saying actually building the part or performing the service
5. Delivery – Simply getting the part from A to B,
6. Warranty- Managing risk following completion of the task

 this short step-by-step guide to creating a Quality Management System (QMS) …

When looking to get to the core of your QMS you have to ask yourself a series of deep questions that require a tremendous amount of introspection, such as:

1. What are our processes that affect our cash flow ?
2. How do they interact?  ( a process map is key for ISO 9000 Certification)
3. How many processes do we have that support these functions? ( this should get you spinning off ideas)

Answering these (and other) questions will help point you to a meaningful starting point for your Quality Management System.   If you’d like to discuss specifics about your QMS, feel free to contact us.

Leadership

Process…a series of operations which bring about a result.  It is a logical, nearly mechanical algorithm devoid of emotion.  You unemotionally define the inputs, suppliers, required actions and desired outcome in terms so you can measure.  You strive for stability so you can then improve capability as measured by customers.  Defining each brick and how they are assembled might not sound so inspirational, but you’re kidding yourself if you think it’s any less important.

Leaderships’ vision of that skyline and processes’ preoccupation with laying bricks can seem far apart and disconnected.   Yet when leadership looks past process, the results are eviscerating to any vision and corrosive to the leaders themselves.

In service organizations, processes are always driven by people, and managing the people for each process is the work of a process owner.   The process is the service and the people are the process.  So the people are the service, trying to be productive each and every day within their process.  Getting processes to work as a system is about getting people to work together toward a final objective.

When leaders ignore process they ignore the people that are the service.  And that never turns out well with your customer.  A current TV show has CEO’s come down from their lofty perches to work ordinary jobs to get a feel for the people and what they do day in and day out.   In a recent episode, the CEO was stunned at the impossibility of work processes.  Workers were stressed out, fought with each other and delivered poor service to customers.  As you can well imagine, no one believed in the CEO much less the CEO’s vision, as he soon found out!

this short .ppt overview of customer-focused process design and Service Blueprinting …

A smart CEO might hand the problem over for process redesign.  He might also say with empathy that this is just the wrong way to treat these people and the customer, and do what is necessary to make it right for both.  Theoretically, the two statements lead to the same place.  But the former continues with the same disconnected state between leadership and people while the latter begins a transformation.

The point of all this is to remind ourselves that working with processes in a services organization is about working with people.  That when we see leadership disconnected from the concerns of process we probably see leadership disconnected from people.  And when we find that situation we’ll probably find dysfunctional teams and dissatisfied customers.  BUT,  when we see leadership concerned with making processes work we will see people who find their jobs fair and who are dedicated to their mission, which should lead to more satisfied and loyal customers.

So all of us as leaders and members of a team need to think about the processes upon which our vision is built because, in so doing, we think about the people in the organization and the customer of our service.  And everyone in that chain will notice the attention, how their work is made easier and thus buys into the larger vision.  If you’d like to discuss the points in this article, contact me.

A critical element in a reshoring decision is a Total Cost of Ownership analysis.  Made popular by the Gartner Group when attempting to capture all the costs of software and IT systems over the product’s life, it is an excellent concept to apply to reshoring as it goes beyond a simple vendor price or internal transfer price by looking at overall system costs.  At a personal level, think how we apply it when comparing cars for purchase. We incorporate costs to maintain, operate, insure, finance and, eventually, what we get back when we dispose of the car.  Total cost of ownership …. not just purchase price.

Reshoring provides a unique opportunity to lower the Total Cost of Ownership as the existing supply chain and internal production processes can be designed with a blank slate.  The iterative redesign that first occurred when it was offshored and then occurs again when reshoring can leverage past experience, and work with a blank slate.

For example, we have a client which offshored a production line to capitalize on lower direct labor costs.  After a severe fire in the offshore facility, they decided to bring the line home.  They performed a Design for Lean analysis on the entire process and lowered the cost to a level significantly less than the pre-fire offshore line.

  this executive brief for a short, practical overview of Lean …

Another client brought back its customer service operations.  Again, through a redesign process and armed with clear Voice-of-the-Customer (VOC) about their offshore facility, they were also able to lower its costs and increase customer satisfaction, thus significantly lowering their Total Cost to Service.

 a short presentation on Customer focused design and service blueprinting …

Redesigning a production line or a service delivery process are great opportunities to really pour through VOC and design the value streams and supporting processes with a clean slate.  Clear VOC, strong design capability and application of lean skills can collectively be used to take advantage of declining costs in the U.S. and better meet customers’ needs thus lowering the Total Cost of Ownership.

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

Every company has a governance system.  The question is simply how effective is that system.   To gauge effectiveness, measure a company’s rate of improvement and its ability to change directions.  In other words, measure a company’s ability to either drive change or respond to change and you’ll have a good sense of its operational governance system.

To gauge a governance system’s capability, in addition to measuring its effectiveness according its industry parameters, you should also look to see if there is evidence of the key elements in the form of activities.

an Executive Brief that describes a framework for operational governance that can help you drive real value (ROI) from your operational excellence programs.

A classic model that can be used to establish and measure a governance system is Policy Deployment.  Look for the Plan-Do-Check-Act (PDCA) phases of Shewhart’s cycle or the cycle of Deming’s modified Plan-Do-Study-Act (PDSA).  The cycle speaks to the intended iterations that increase the level of performance.

We take the discussion to the next level by laying out activities within each phase of the cycles that can help an organization.  Scorecards and Dashboards within the Plan phase.  The execution of value streams within Do.  The creation of a system of Key Performance Indicators and their constant evaluation against actual performance can fulfill the Study/Check phase. And finally, improvement activities to close performance gaps constitute the Act phase.

We also consider the creation of a well-organized project pipeline to be the link between the Study/Check phase and the Act phase.  It documents the outcome of Study and the path on which to Act.  The project pipeline is the transition point from operational governance to operational improvement.

In fact, we take the four elements of the Shewhart or Deming cycles and think about their movement not as much as a sequential cycle but more like four pistons in a car engine.  Each of them pump on their own cycle but they have a timing that is synchronized and together move the car.

Operational governance systems can be expressed in many ways.  Policy Deployment is a classic framework.  Each is a systematic approach to how policy is created and administered or deployed.  We developed our operational governance system in detail by working with leading companies in many industries and varied countries.  Yet, it still aligns with a classic like Policy Deployment.  If you’d like to discuss how our detailed plan for governance operates, feel free to contact me.

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.

How do these attributes change the design process?  Well imagine how difficult it is to know if you have the right design if you can’t easily measure different attempts since repeatability and storability are issues.  And you really aren’t sure what you can measure since quality is defined by the customer’s experience of an outcome more than measuring the attributes of output.  And imagine what happens to multi-generational planning when you have to factor in how difficult it is to maintain your moat of defensibility for a new service without the right of a patent. Time and again basic elements of a design process are scraped or reinvented in an attempt to build a proxy for what is normally taught and practiced as good design principles.

In the end, you essentially have to nearly start over n building your design process for a service.  Basics are retained but new elements must be introduced or emphasized.  In a recent blog post, I point out how the basic principle of tollgates must be retained but mapping becomes the foundation to test, validate and repeat due to the absence of data.

a short presentation on Service Blueprinting now ……..

At Qualtec, we’ve built a new design process or roadmap and established a set of tools to support each step of the way.  We will continue to write about this subject as we find there is a real dearth of information available.  But we also welcome your input and so if you’d like to discuss the differences and how to adapt to them, we invite you to contact us.

Within Service Design, we believe there are two activities that we have observed service companies don’t aggressively pursue and which, if improved, could dramatically improve its cycle times, costs and perceived customer service quality.  Specifically, intensive mapping and tollgating are two basic design process and design principles that service companies would be well served to improve.

Tollgates should serve as business reviews and not technical reviews.  Tollgate business reviews should include cross-functional teams that are named based upon the business risk of the project.  Some new service offerings should include the CEO and others shouldn’t require such attention.  Tollgate reviews should include discussions about project risk, customer requirements, financial objectives and schedule/timeline.

Certainly, when constructing customer requirements for the service, there should be some form of VOC, such as a quantitative or qualitative survey, and conversion to CTQs using some form of decision matrix or tool such as a QFD.  But customer input shouldn’t stop after setting initial customer requirements.

Customers should be part of the tollgate process.  They should be treated as a stakeholder just like everyone that is part of the cross-functional team.  Of course, design incorporates a lot of proprietary information that is part of an entity’s business model and which a company certainly doesn’t want to disclose to its customers as it risks the very essence of their value proposition.  This is especially true for B2B service companies.

a short .ppt dealing with tollgate reviews in the service design process …

The key to incorporating the customer in the tollgate process and still maintaining a protective shield on your value proposition is to know when and on what to include the client.  A valuable tool to identify those points is a service blueprint that details all the “on stage” points of customer interaction.  These are the customer input points.  It is here that they form their perception of service quality.

Service companies still have very ad hoc service design processes.  Process mapping and tollgate reviews are two simple tools that can put some initial structure into service design.  Service Blueprinting, a form of process mapping, is a great tool to understand how to extend tollgate reviews to include customer feedback during design.  The stronger the design process, the shorter the lead times, lower the costs and higher the perceived customer experience.  If you would like to discuss any of these concepts or how to implement them, contact me.