Op Ex & Lean Six Sigma

Know When to Listen to Your Customers...and When Not To

Balancing customer needs and business interests is critical, and "voice of the customer" exercises can be artificial. An iterative approach is necessary. This excerpt from "The Six Sigma Leader" offers some tips.

By Peter Pande, President, Pivotal Resources

Every company I’ve worked with over the past 20 years has had a policy or vision statement of some kind that claims, in essence: “We are committed to meeting or exceeding customer expectations 100 percent of the time.”

But there’s a point at which commitment to customers must be balanced with the interests of the business. [1] As if “satisfaction” and “profitability” weren’t hard enough to balance, there’s the added difficulty of staying abreast of changing customers, markets and opportunities. This is where “focus on the customer” can – and does – get companies into trouble. By concentrating on satisfying today’s customers, selling them the products and services they want now, you can fail to pay attention to finding opportunities to serve tomorrow’s customers (who may be an entirely different group from those you have now).

The key skills of Six Sigma Leaders are put to their ultimate test in this challenge of balancing customer needs and their organizations’ self-interest today while being ready to change with the customer, or to begin serving new customers. This article will examine ways to build a more solid and practical approach to increasing customer focus balanced by the need for flexibility and long-term success. Although much of what’s here relates to “external” customers or stakeholders, these same concepts can be applied easily to “internal” groups.

Systematic approach to understanding customers.

Back in the very early days of what’s now called Six Sigma, managers at Motorola put together a simple way to measure process performance based on counting “defects.” Counting defects is by no means the only good way to evaluate your business; however, Motorola’s choice led to a subtle but important awakening for a lot of companies.

Trying to count defects in a business led to some key questions: What is a defect? Who decides? Where do you look for them? There could be a lot of arguments over what a defect really is. An engineer, trained to build electronic components a certain way, might have one definition; a manager might have a different interpretation; and so on. Multiply that by every individual engineer, manager or employee and soon you have hundreds or thousands of so-called defects – or at least that many dueling opinions on what is or is not a defect.

As a result, Motorola decided to consult a “higher authority”: Rather than arguing over it, they defined a “defect” as any failure to meet the requirement of an external customer. [2] How is this a breakthrough? Because trying to understand and quantify “defect” this way exposed a weakness shared by many, if not all, businesses.

Much of the understanding about what’s important to external customers did not come from those customers themselves, but from internal groups defining or deciding what customers want.

As the measure was applied and as more scrutiny was placed on identifying “defects,” many instances arose where it became clear that the “customer focus” companies were claiming to practice was not quite as effective as they’d believed. It turned out there were a lot more defects, as defined by customers, than there should have been. [3]

Figuring out what customers want is not an easy thing to do, but Six Sigma leaders first have to understand and address the factors that undermine customer focus.

Size and Silos

The nature of the modern corporation is like an extremely dense object. As the business grows, there’s more and more “mass” on the inside while the surface area – the part that has contact with the outside world – grows more slowly. Customer information that does filter through doesn’t lead to any action because an employee fails to understand its significance or, worse, it gets ignored because of the most damaging excuse in business: “That’s not my job.”

When people do engage with customers, the nature of that contact is usually limited by their function or role. This is true even in small organizations; roles like accounting, logistics, sales, and so forth get specialized even when you have only five or 10 people in a firm. The challenge for a larger business, however, is that those role-focused people are less likely to understand the “big picture” of that customer’s experience or relationship.

Most of what people care about, and in fact are asked to care about by their management, are things internal to their business. This is really the “bridge” between the size and silos challenge and the lack of empathy (Box). The silos create the internal focus, and internal focus leads to cluelessness about what customers really consider important.

Think of how senior executives usually describe their company’s goals. Here are a few common phrases:

  • Grow revenue by 15% per year over the next three years.
  • Capture 30% market share.
  • Enter five hot global emerging markets.
  • Launch two new products per quarter.
  • Boost gross margins by 3% in the coming year.
  • Make one major and one minor acquisition each year.

Rarely in these pronouncements is the emphasis on the customer’s experience. Leaders get into the habit of defining success in terms of the company’s goals, when those are really outcomes of what is done for customers. [This internal focus can be exacerbated by] mergers or reorganizations. It takes active, consistent leadership to sustain an outward-looking organization.

The Customer Is Always . . .

How would you fill in that blank? Most people favor: “right,” perhaps the most traditional formula on the planet [4], but a better option would be “important.” One of the more challenging issues for a business is to determine how to say “no” to a customer, in an appropriate way and at the right time [5].

Suddenly changing a “yes” to a “no” with customers is not usually a good idea. Any change in policy or approach has to be carefully managed and deployed. Employees must also be prepared to follow new rules and deal with any concerns/complaints.

Your efforts must be consistent, because the unraveling of customer focus starts at the top [6].

To summarize the tasks in building a more thorough understanding of your customers and the broader environment and use of your products and services:

1. Start looking at the customers’ experience – and how their view of your organization is formed – as an ongoing process rather than an event.

2. Accept that to gain insights into customers and their needs, you’ll have to be ready to test and even abandon your assumptions about customers and the world around them (meaning your world, too).

3. Be ready to look at the customers’ “experience” much as a satellite photo-map Web site (such as Google Earth) does: from miles high, or from right at ground level.

4. Engage your people in this expanded view, and communicate what you learn to others in the organization.

Ask, Interpret, Test

I usually fly with American Airlines or one of its global partners and am generally a pretty satisfied customer. A few years ago, they made an extra effort to try to find out how happy I was. I learned quickly: When I saw a flight attendant coming down the aisle with a sheaf of pink paper, I would try to look very busy.

I knew from previous flights that those pink pages represented a customer survey on steroids. It was full of detailed questions about me, my flight, my view of every aspect of the service I’d received, my seat comfort, the food. Altogether, the survey took nearly an hour to complete. They were very friendly and even provided me with a pencil.

This example is pretty typical, I’m afraid, of a lot of well-intentioned “voice of the customer” efforts. One huge survey, or even a lot of small ones, won’t unlock the mystery of your customers.

Realistically, you can never fully understand them (for one thing, their needs are usually changing), but through persistent and effective effort you can reduce the mystery.

The best mystery-reducing approach is an iterative, investigative process akin to the validation cycle. You begin with goals and form questions (defining what you want to learn), draw initial conclusions or hypotheses (noting what you believe customers want), and then further evaluate and refine the hypotheses based on additional facts. The amount of evaluation is based, of course, on how reliable your conclusions are and how critical it is to be absolutely certain.

For example, let’s say the issue is to understand the required delivery date for a product. If that’s already specified in a contract, you might not do any hypothesis testing (though some reconfirmation still might be a good idea). On the other hand, if you’re working to improve delivery time performance across a range of customers (and their needs are not spelled out in a contract), you’d probably want to check your hypotheses fairly carefully.

One of our clients actually began a “delivery time improvement” effort thinking that all customers would prefer that their orders arrive “as soon as possible.” When they tested that view, it turned out that accuracy according to a promised or scheduled delivery time (“Bring it when you said you would”) was the more accurate requirement definition.

Finding the Middle Ground

What you learn as you take a closer, more discerning look at your customers may not be comforting. You may find customer needs that you are not meeting, including some that, as of now, you can’t meet (technically or profitably).

Not all gaps arise because of the customer’s perceived needs. It’s also common for a company, or even an entire industry, to serve up services, features, and/or benefits that are of little to no interest to its customers. You may get stuck in what one of my clients once described as an “arms race” with competitors and market perception where – despite your better judgment, or even without realizing it – you are escalating the sophistication of your offering or adding “weapons” that provide marginal value.

Smack in the middle of Los Angeles is a remarkable natural wonder, the La Brea Tar Pits. This is a site where, even today, large pools of oil form at the surface of the earth in what looks like a marsh (technically it’s an oil seep). Through thousands of years, animals – many now extinct – wandered into the pits, were trapped, died, and left their bones to be preserved by the tar. At the nearby museum there’s an entire wall with skulls of saber-tooth cats – dozens of them – that met their demise in the tar.

How do you keep from becoming a saber-tooth cat? There are four key Six Sigma leadership habits that can help you reduce your odds of extinction:

  • Accept the Reality of the Tar Pits
    The numbers of company and industry failures and downturns where leaders failed to respond in spite of clear danger signs, or missed out on great opportunities, suggest that it’s smarter to see every clue as worthy of attention than to dismiss it as trivial.
  • Listen Ever More Carefully to the Customer, and the Customer’s Customers
    It may be too late when you start seeing the symptoms of a change in your current numbers, read about a new product that could undermine your entire business, or start smelling oil seeping from the ground.
  • Ignore the Customer
    The “New Coke” offers a negative example [7], but a positive example of a company that got itself into, and then out of, its own tar pit is Motorola with its RAZR cell phone. As Fortune recounted: “Motorola’s ‘human factors’ unit dictated that phones more than 49 millimeters wide would be deemed uncomfortable by consumers. The RAZR team concluded otherwise. Their only data points: their own instincts.” [8]
  • Balance Change and Constancy
    Rapid change makes things ever more difficult, but Six Sigma leadership is about balance and flexibility, which means also paying attention to other signals. And the fact is, some of our faith in the breakneck pace of change is probably exaggerated. [9] As David Bodanis [10] has pointed out, current technology is squelching innovation today. Too much is invested in our current infrastructure, and the owners of that technology have too much to lose, to make rapid roll-out of new ideas or technologies acceptable or affordable.

On the other hand, it seems just as common that the providers of innovation are moving ahead while the customers are just not “there” yet. There is no single truth about change. Listen to your customers intently – but also be prepared to ignore them completely, to take chances and anticipate things they can’t understand. You have to be fast on your feet – because where you’re standing might start turning tar-like – but also be careful not to start running headlong and find yourself stuck and sinking.


 

Lack of Empathy: A Lesson from Monty Python

Empathy may be a strong word, but it’s appropriate – especially when you
think of the kinds of pain companies sometimes inflict on their customers. What
typically shows up in a service environment is a sign of insensitivity permeating
through the whole organization and just manifesting itself when a client calls or
a customer walks into the store.

There’s a Monty Python sketch about a woman attempting to get a new gas
stove that touches on lack of empathy.

MRS PINNET: Oh, will they come and fix it?

FIRST GAS MAN: No no, they don’t come out.

MRS PINNET: Ooh, can you fix it?

THIRD GAS MAN: No, we can’t go around doing maintenance.

FIRST GAS MAN: We haven’t got the staff.

FOURTH GAS MAN: (walking in): Not unless it’s a special.

MRS PINNET: What’s a “special”?

SECOND GAS MAN: It’s a 2-7-6 or a 3-9-B.

MRS PINNET: Well, can’t you phone somebody?

SECOND GAS MAN: Not on a Friday. (A fifth gas man walks in.)

MRS PINNET: Well, what can you do?

FIRST GAS MAN: We could try head office.

FIFTH GAS MAN: No, that’s emergency only.

FIRST GAS MAN: Yeah, yeah . . .

MRS PINNET (getting agitated): Look, look — I waited three months for you
to come round! I haven’t been able to cook a meal since Christmas! This is an
emergency!

FIRST GAS MAN: No it’s not.

SECOND GAS MAN: Nope, nope, an emergency is contingent upon there
being immediate danger to life.

MRS PINNET: Oh dear.

FIRST GAS MAN: Mind you, we can, er, endanger your life for you.

MRS PINNET: Can you?

FIRST GAS MAN: Yeah.

THIRD GAS MAN: Just lie down on the floor.

GAS MAN: Yeah.

MRS PINNET: Ooh, that’s marvelous.

SECOND GAS MAN: Right. Harry, get the pipes!

SIXTH GAS MAN (entering): Right-o, mate.

FIRST GAS MAN: We’ll soon have you asphyxiated, love.

MRS PINNET: Ooh, really?

(She lies down. The gas men crowd around her. The sixth gas man leads
a rubber pipe to her mouth.)

SECOND GAS MAN (Calling outside): Send out for form P-3BE!

MRS PINNET: Ooh, that’s lovely, thank you.

FIRST GAS MAN: Oh, don’t mention it, love – all part of the service. Get us a
P-B-E, Charlie?

SEVENTH GAS MAN: Oh, right-o. Get a P-B-E, Frank?

As absurd as it is to think of asphyxiating a customer so she can get fast
service, I’d bet most people have one or more horror stories where it felt like it
came close! The gas men may be insensitive, but their behavior is a function of
the business systems around them.


 

Footnotes

1. This was the “vision statement” for Six Sigma developed by our client GE Capital back in 1996.

2. There are still some complications to deal with, but in general this would mean that if a cracked resistor or other “internal” defect did not affect the performance of a piece of electronics according to the customer’s requirements, it was not a defect.

3. Contrary to what some people assume, measuring “defects” works just as well in sales, customer service, finance, or other less-tangible processes as it does with physical products like a cell phone or a shoe.

4. Actually, the phrase is attributed to H. Gordon Selfridge, the founder of Selfridge’s, one of the best-known department stores in the United Kingdom. Note: Selfridge died penniless and insane.

5. The temptation to say “yes” in this arena can even become a smokescreen to hide your own shortcomings. When Lee Iacocca used to pitch Chrysler’s great warranty program, on the one hand it showed a sign of confidence – but it could also have been viewed as a message that: “You might have some issues with our cars, but please buy them anyway.”

6. Denove, C. and Power IV, J.D., Satisfaction: How Every Great Company Listens to the Voice of the Customer, New York, Portfolio: 2006, p. 121.

7. As Malcolm Gladwell points out in his book Blink! the research methodologies that led to the Coke fiasco did not take a “big picture” view and concentrated on a blind taste test.

8. See “RAZR’S edge: How a team of engineers and designers defied Motorola’s own rules to create the cellphone that revived their company.” money.cnn.com/2006/ 05/31/magazines/fortune/razr_greatteams_fortune/.

9. We probably also underestimate the pace of change in the past, either because it’s a distant memory or simply because we weren’t around to notice it. It was a mere decade from the first flight at Kitty Hawk to the first scheduled commercial air travel. Radar was conceived, perfected, and put into widespread use within the time frame of World War II.

10. Bodanis, D. “Slow Forward: Is the Speed of Technological Change an Illusion?” Discover magazine, June 2006, pp. 46–49.

 

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