Low Cost of Capital, Low Chance of Lean

This will be short and sweet.  I was having a conversation with the CEO of a major food producer recently.  We talked about what he needed to do in order to start to turn his company Lean.  During our conversation it became clear that excess inventory, both raw materials and finished goods was a major problem for them.  I explained that one of the intents of Lean is to minimize inventory at which point he made an interesting observation.  He said "we haven't actually worried as much about inventory levels since the cost of borrowing got so cheap."

I thought about that and realized that he was probably right.  When the cost of capital is high it costs companies more money to hold onto inventory and as a result they are more likely to manage that spending.  However when inventory doesn't "cost" much in terms of interest rates there is less incentive to control those costs.  I wonder just what the impact of lower interest rates is on the rate of adoption of Lean principles.

@leanmind

One Reason Not to Ask Your Customer

You have all seen me go on and on about how important it is to listen to the Voice of your Customer in order to define Value for your process.  I even recently simplified things by writing a blog that gave Two reasons to have customers define value.  In this blog I want to give a compelling reason NOT to listen to the voice of your customer.

As a passionate Lean practitioner I am always on the lookout for great examples of organizations applying Lean techniques.  In particular I am forever looking for great ideas to share on how to listen to the Voice of your Customer.  As a result I tend to complete a lot of on-line surveys that I usually find on the back of my (retail) sales receipts.  It is no surprise that folks in retail have a much greater sense of Customer and Value than people who never see their customers.

I see a disturbing trend in these on-line surveys, however and I am not sure if it is Sales or Marketing or both who are to blame.  But I certainly hope there are no Lean consultants behind this idea.  If there are then it is time to switch firms....or just read the first 28 pages of the book "Lean Thinking" by Womack and Jones.

The problem is this: most on-line customer surveys are poorly disguised tricks to solicit personal contact information from customers that will undoubtedly be used at a later date to spam respondents' Inboxes with deals and promotions.  This is wrong, wrong, wrong!

First of all how dare you waste your customers' time by making them go through a tedious process to set up a "feedback" account with your firm complete with mandatory fields and requests for everything but bank account numbers and PINs?  What can you possibly need that information for anyway?  And those of you in Marketing about to lecture me on customer profiling leave the process improvement to those who care about adding Value and go back to ordering the fancy display booth and brochures for your next trade show.

Second of all what's with the locked list of 20 attributes asking me to rank my "customer experience" on a scale of 0 to 10?"  Again that's great if you are the head of Marketing and you are trying to justify your existence by tracking "quantifiable and repeatable" metrics that no one pays attention to.  And how can you possibly know the only 20 attributes that completely define your product or service anyway?

Finally don't insult your customer by telling them that by completing this bogus survey they'll be entered into some random contest to win a trip to a fake holiday destination.  First of all everyone knows that no one ever wins those things.  And second of all....well the fact that no one ever wins is enough.

If you are serious about listening to the Voice of your Customer and you are going to use on-line surveys then do not farm it out to a 3rd party marketing group.  Do it the old fashioned way.  Pay your customers for their valuable time with a 5% off coupon.  Don't make them give personal contact information if they choose not to.  And allow them to be as open ended in their feedback as possible.  The following two simple questions with unlimited room to write free-form responses before printing off a 5% off coupon will suffice:

1. Please describe how our organization adds Value to you.
2. Please describe all aspects of your experience with us you feel is Waste.

To be sure it will take more time to sift through the written responses.  But your organization will have a much more objecive description of what you do that adds Value.  And you will have customers much more willing to help you along your Lean journey.

@leanmind

Two Reasons To Have Customer Define Value

Everyone who studies Lean knows that the customer defines Value, at least they should know that.  As for how many actually involve the customer?  Well that depends.  In a recent on-line survey that we conducted 100% of respondents reported that they directly involve their customers in Kaizen events "always" or "most of the time."  Yet in a subsequent on-line poll asking how people involve their customers (surveys, interviews, etc.) only a tenth the number of people responded.  That leads us to believe our suspicion that most do not involve the customer.

Well for those of you who do we salute you.  Keep up the good work.  For those of you who do not the good news is you are not alone.  In fact you are part of the vast majority.  And for those of you feeling special let me emphasize that "reading your customer's minds" is not the same as involving your customers; far from it.

So why involve the customers at all?  Why not just get an enthusiastic group of employees together, assign them to an important area within your organization, give them some tips on how to conduct a Kaizen, or better yet hire an expert to facilitate the exercise, and go to it?  Why bother with customers at all?  I mean really what do customers know about what goes on in the depths of your organization anyway?  And all they'd probably do is question most of the things you do and just kill everyone's buzz (yes I was born in the 60s).

Reason 1: Maximize your Return on Investment

Let's face it, making improvements requires time and energy from those involved.  And both of those cost money which means you are making an investment.  Mind you if done properly an improvement effort is highly enjoyable and satisfying for all involved.  But all improvement events require a certain level of investment to be successful.

So if you are going to make the investment into an improvement exercise you owe it to yourself and those putting in the effort to ensure that what you fix will actually improve things.  And who better to determine whether things are "better" than your customers.  Sure it's important that staff feel loved and appreciated and comfortable and safe and all those good things.  But if you are improving all those things yet doing nothing to add more Value to your customers then you are wasting your time, your energy and your money.

Reason 2: Reduce Resistance to Change

Let's also face it, everyone embraces change...for everyone but themselves.  Not too many people in an organization will say to themselves "you know 99% of what I do day in and day out adds no Value to our customers."  As human beings we have evolved amazing abilities to justify what we do well to others and ourselves.  Because we are good at something it must add Value.  Because we have always done something it must add Value.  Because we enjoy doing something it must add Value.  And so on.

So really the only way a group can truly tackle the Waste that is most of what they do is to have an objective 3rd party tell them that it's Waste in the first place.  I have yet to find a Customer Help Desk that rallies behind the motto "Everything we do is Waste so let's eliminate everything!"  Or a maintenance department that aggressively attacks every repair job and every preventive maintenance activity with the intent to eliminate everything.  And so on throughout every organization.  It is only in the cold bright light of the Voice of the Customer that we truly see the vast quantities of Waste that blanket most everything we touch.

So for those of you just starting out on your Lean journey, or those of you who are months or years into it and starting to get that uncomfortable feeling of "was it all worth it," I can't emphasize enough the importance of interacting directly with your customers, your clients, your patients, your .... well whoever it is who pays your bills.  You will be amazed, crushed, astounded and eternally grateful that you did.

@leanmind