Archive for the ‘Service Design’ Category

How to define a problem

February 3, 2014

Problems tend to be defined in terms of the pain felt by the organization. Consequently the solutions may relieve the pain or embarrassment only to increase the hidden costs of nonconformity. For example, in order to reduce production costs we must have longer production runs thereby generating expensive inventory.

But system thinking and customer focus can change this for the benefit of customers and the organization’s other stakeholders.

Customer-focused-system-thinking organizations define their problems by describing how they as systems will fail or did fail to fulfill customer needs.

Their problem definitions comprise three parts:

A. The customers’ requirements;
B. The evidence of the system not being able to fulfill customers’ timeliness, affordability and performance requirements (perhaps including the PONC*); and
C. The nature of the problem to be solved.

Example:

A. Customers’ requirements fluctuate at short notice;
B. System resists changing its processes resulting in loss of business and customer loyalty (PONC approx $100k pm); and
C. Unable to fulfill frequent changes in customer requirements due to long lead times.

Note that it is better to blame the system than a person.

And, of course, the problem may be an opportunity.

In this case the system’s problem solving, or problem dissolving, processes result in the actions necessary to change their system. The changes may include mistake-proofed short-run processes that respond fast enough to satisfy customer demand for different products while continuing to deliver quality and value.

You can also define your problems in terms of how your system fails to fulfill customer needs. Not only your customers will benefit, you’ll also create more successful stakeholders.

Risks and innovation

January 19, 2014

In 1979, Daniel Kahneman and Amos Tversky won the Nobel Prize for Economics for their “Prospect Theory: An Analysis of Decision under Risk”.

This theory shows that we prefer certainty to taking a risk. We see this on auction sites where the “Buy It Now” price is often much higher than the price of similar items sold by auctions. The BIN price may influence the bidding but it is for those of us who are willing to pay more for certainty.

Stable, well-established organizations tend to be risk averse. They place great value on their stability and choose continual improvement instead of innovating. Indeed, most organizations with process-based management systems continually improve their goods, services and processes. Some also go beyond development to design something entirely new.

Sustainable organizations do both; they continually improve and they innovate to find new ways of fulfilling their missions.

Successfully managing risk implies formal largely predicable processes. Being innovative tells us that selected team members interact in an informal free-thinking “sandbox” of collaborative effort. How do process-based organizational management systems help their leaders to manage innovation and the risks inherent to innovation?

First, let us never forget that effective process-based management systems deliver a valuable resource: time. By preventing problems, the management system substantially reduces time wasted on firefighting. The organization has time to innovate. Secondly, remember the leaders who serve to lead. Such leaders remove causes of fear from their systems. Their words and actions earn trust by selflessly taking responsibility for helping employees to understand and fulfill stakeholder needs. In this supportive environment, noble causes can stimulate innovation to find new ways of creating successful stakeholders.

The leader challenges and authorizes the special innovation team that comprises accomplished problem solvers. Unlike capable processes, innovating requires the leader’s patience and to expect to “fail” many times. Of course, knowing what does not work is not really a failure. And so-called failures may be successful in completely unexpected ways. Think Post It Note®.

Innovative teams comprise a mixture of different types of people with a wide variety of talents. Instead of endlessly talking, the team creates prototypes as soon as possible. Prototyping a new service may require a focus group. The team allows for the fact that focus groups usually comprise people who favor certainty. The prototype must impart value by solving a costly problem.

A shared understanding of the costly problem is a vital input to innovating. In bringing the innovation to market (internally or externally), successful organizations decide which innovations yield the greatest benefit to stakeholders. They determine which innovations have the greatest chance of success. The latter stages of innovating show that innovating is a process that really is design rather than development. It is a process that includes such risk assessment techniques as SMEA (Success Modes and Effects Analysis) and FMEA (Failure Modes and Effects Analysis) before verifying and then validating the design.

Of course, risk has an upside. Nevertheless, risk managers tend to manage risk to avoid loss instead of managing risk to add value. Prospect Theory can help them to understand this. By fully appreciating risk, we recognize and manage both the downside and the upside of our decisions including our decisions to innovate.

In responding to a recognized adverse risk or threat, we use our management system to avoid, accept, transfer and mitigate aspects of the threat. Similarly, we respond to a recognized positive risk or opportunity by using our management system to share, enhance, accept and realize the opportunity.

Knowing Kahneman and Tversky’s Prospect Theory, we can dissolve the fear that would otherwise stop us from making difficult investment decisions. Organizations can enjoy the thrill and rewards of innovation by recognizing the value of taking positive risks that are essential for sustainable organizations to create even more successful stakeholders.

Effectiveness, value then efficiency

December 10, 2013

All of us have a responsibility for achieving more with less. To be more efficient, we experiment to see what works for customers, what nearly works and what does not work.

Organizations should start by studying themselves as systems. Once their leaders understand how their system helps employees to fulfill their mission or not, they think and work differently. They start their efficiency improvement cycles by developing their management system to drive their processes through the walls of silos to focus on customers. Then they can focus on improving the system to deliver what customers value.

Given an environment that supports such thinking, together with our colleagues, we start the experiment by studying customer demand, what customers’ value and waste. We may then set ourselves a hypothesis to test the best way to satisfy value demand and reduce failure demand. We carefully work to our new or updated procedure to see if it is effective. We try again until successful. We institutionalize the successful new process so others in the system can depend on it. This also enables us to improve efficiency further with another cycle of improvement.

Improvement often starts by eliminating the local causes of problems from a process. Perhaps by mistake-proofing the riskiest processes too. But, after several improvement cycles, we find the wider system has the greatest impact, both adverse and beneficial, on our process. System-wide impacts come from other processes in the system. These impacts include the shared organizational beliefs (or culture) that leaders reinforce or weaken with their processes.

When the continual improvement cycle is effective it continues to make the system and its processes more efficient. The speed of this investment should be a result of the calculation of risk and reward on behalf of investors who share the mission for customer value. The management system should deliver the information needed for these risk-reward decisions from the data collected on what customers’ value.

Conformity is necessary for effectiveness and predictable effectiveness is necessary for delivering value and improving efficiency. Predictable outcomes are a mark of effective processes and systems. “Luck” best describes an organization happening to fulfill a requirement with an unknown process or system.

Start by understanding your organization as a system. How does it help your organization to fulfill your mission? What are the leadership processes? Be prepared to think and work differently. Start your efficiency improvement cycles by developing your management system so it is process-based leaving no silos. Then focus on improving your system and its processes to deliver what your current and future customers value.

Is quality the cheapest option?

November 1, 2013

Some of us instinctively think quality products should cost more. But by removing the costs of nonconformity, quality products actually cost less to produce. Nonconformity, by the way, is a failure to meet the requirements including the requirements of customers. Some managers pay the price of nonconformity instead of making quality a reality for employees and customers.

At the normal 2 or 3 sigma, the price of nonconformity is 40% of turnover. Many times the level of profit for most organizations. Leaders may not need to measure these avoidable costs to eliminate the causes of failures to meet requirements from their systems. They may even help their suppliers to remove these avoidable costs too.

But more product verification will not help because it is too late. Inspection or testing merely sorts bad product from good product. Therefore, verification of the product is part of the price paid for failing to design capable processes. Capable processes are validated to result in products that need no inspection or testing.

Accordingly, we work to make sure our organizational management systems help employees and suppliers to add value for each customer. Adding value faster while preventing loss sooner. Having prevented nonconformity in our goods, we should also design the service part of our products so we avoid paying the price of service nonconformity too.

Leaders, who choose to avoid paying the price of nonconformity, invest in their process-based organizational management systems so more work is right the first time. They discover that buying and delivering quality costs a lot less than the alternatives. What’s more, in markets, where quality rarely is delivered, customers may be willing to pay a little more to have their requirements fulfilled exactly.

Even so, “quality is free” because it is cheaper to buy and deliver quality than not. Here we see the cost of quality at its lowest when the product exactly meets the requirements of the customer:

Earlier versions of these cost of quality curves mistakenly showed costs tending to infinity with perfection. The old curves showed perfection is not quality. Thankfully, in 1999, these curves were corrected to accord with reality and Crosby’s 1979 definition of quality. Of course, by then Taguchi had also showed that any deviation from the requirement increases costs to society.

In summary, managers of quality prevent nonconforming products to assure quality and satisfy customers. They govern their organizational management systems for creating more successful customers by making and keeping more competitive promises. Tomorrow’s managers of quality will also be focused on sustainability for all by creating more successful stakeholders.

As we can see, designing and producing quality remains the cheapest sustainable option.

Thriving instead of just surviving

July 4, 2013

Thriving companies make effective use of resources to create successful customers. Zombie companies earn just enough to pay the interest on their debts. Low interest rates allow zombie companies to exist without investing in new products, processes and their management systems. As interest rates rise, the zombie companies will disappear unless they act now.

How do companies stop surviving and start thriving in this economy?

Refocus on your mission:

Your company’s mission is the reason your company exists. It is the system’s purpose. Cutting everything by 20% or more may be instinctive but without regard for the mission, it will put the system, your company, into a death spiral.

Instead, be creative. Your core process (from customer needs to cash in the bank) is mission critical. Determine the vital few changes that will yield most of the efficiency improvements.

Study your marketing and selling process. Perhaps you can go viral via social networks to explain clearly how your company creates successful customers. Study your innovation process. Do you fully understand, from the customer’s point of view, each of their objectives? Then design creative solutions with superlative service (see below) to help each customer to fulfill their objectives. Sell the value as seen by each customer but do not cut prices. Use your management system to improve efficiency and reduce costs but do not offer discounts.

Superlative customer service:

Companies often focus their management systems on tangible goods. Indeed, for nearly three decades, accredited registrars have encouraged their system certification clients to ignore their service design processes!

Leaders know that superlative customer service can influence each customer to buy on value instead of price.

Study your product design process. Ensure it designs the whole experience the customer has with your company. Engage your employees in the redesign of their interactions with customers by analyzing the customer’s experiences as they are. Agree upon the service changes so they are as they should be from the customer’s perspective. Make this new process part of your management system by changing the affected processes such as training, selling and maintaining the computer network. Continually improve the customer experience with your management system.

By engaging your employees in the redesign of their interactions with customers, you inspire them so they help your company to thrive again.