By Jon Miller | Post Date: July 26, 2004 1:41 PM | Comments: 6
There's an often-cited Harvard Business Review statistic that goes something like "Developing a new client relationship costs between six to eight times more than maintaining an existing relationship". Spending six times more on customer retention does not sound Lean.
For review, Lean can be boiled down to three rules:
#1: The customer defines value
While there is a large body of well-developed systems and methods for achieving #3 (Just In Time, cellular manufacturing, etc.) and the entire focus of kaizen is on improving performance by doing #2, there is surprisingly little in the Lean body of knowledge on #1, defining what customers value.
Take for example the 'Lean Pathway' that the Lean Enterprise Institute uses to describe the steps in a Lean Transformation. It states "Specify Value" as step one, yet contains no tools, strategies, or methods on how to do this. At the beginning of Value Stream Mapping it is necessary to define what the customer values. While it is fairly simple to do this for a manufacturing process, it is rarely done well at the enterprise level, particularly for service companies.
To remove any doubt that customer service is an important part of Lean, let's look at how poor customer service creates waste. Doing a poor job with a client relationship requires putting in effort to repair damage (correction, defects). Having to do more sales & marketing activity to keep the pipeline full also stretches valuable resources (overproduction). Doing things we think will keeps the customer happy but may not is also a waste (processing waste). And finally, rapid growth leads to managing more customers or more projects (inventory), at a lower quality level resulting in customer turnover.
From a product design standpoint Quality Function Deployment does a good job with Voice of Customer and other tools to narrow down the design features customers want. Six Sigma tools can be applied to statistically identify the customers' spoken and unspoken needs. Both of these tend to focus on analysis of data rather than listening to how happy or unhappy the customers are about the job you are doing right now.
The rule of thumb that letting a defect pass undetected downstream and having to correct it later costs 10 times as much as correcting the problem at the source. Perhaps the "six to eight" times quoted in the Harvard Business Review is conservative. We need a "customer service at the source" as well as "quality at the source".
This begins with face to face interviews with clients, followed by defined customer satisfaction criteria, and frequent satisfaction checks throughout the process. Encourage customers to tell you sooner when they are not satisfied. Encourage people to make it right with the customer sooner. This will save time and money, and keep customers happy.Comments are moderated to filter spam and inappropriate content. There may be a delay before your comment is published.