Mar 3, 2011 | Customers, Lean, Operations
Articulating a Customer Value Proposition, understanding which activities add value to the customer, and which do not, is core to any successful marketing activity. However, so many CVP’s I see are a bunch of words dreamt up over a beer, and have little to do with how a customer interacts with, uses, and values a product 0r service.
There is a relatively simple way to measure a CVP, a ratio of the Money spent that adds customer value, divided by total money spent, a CVP ratio! I am indebted to Bill Waddell for the idea, and like most great ideas, it is simple.
The notion of waste is a foundation to Lean thinking but can get tangled up in the definition of what activities are necessary to run an enterprise, but do not add value to the customer, and those that are just waste. However, having made the distinction, and done a bit of customer research, you can now put a number on the value added, and track it over time.
Should keep the accountants and MBA holders happy, and unlike many measures those numerator driven types grasp, will add value.
Feb 22, 2011 | Management, Operations, Strategy
Boeing, for a while after it took over McDonnell-Douglas, “owned” the commercial airliner business, with only the Airbus consortium as competition in the large end of the business, although there are others in the small commuter end.
However, the 787 “Dreamliner” being 3 years late, and billions over budget, has seen a number of early adopter airlines move to the big new Airbus A380. In the case of Qantas, this decision took them from a one supplier airline, Boeing, to a two supplier airline, a huge decision in the long term context of the life of an airliner model, the 747 introduced commercially in 1970, and still going pretty strongly, delivering sales of spares, upgrades, training, and maintenance to Boeing.
Outsourcing, or “off-shoring” as it is in some cases often delivers a short term boost to a balance sheet, but the long term cost can be huge if it is not done well, and few do it well. Boeing appear to have stuffed it up with the 787, and will be paying the bill for many years.
I keep banging on about the phantom benefits of outsourcing, and the contrarian option of developing lean disciplines internally to retain and develop the capabilities to compete in the long term, and the very early appearance of a trend for bringing Intellectual Capital sensitive development “home”. The apparent challenges facing Boeing in the delivery of the 787 will provide lots of fodder for the argument.
Feb 21, 2011 | Branding, Customers, Operations
The world-wide recall in 2009 of 10 million vehicles across Toyota’s range must have cost hundreds of millions of dollars, but is dwarfed by the long term cost to their brand.
Now, the software blamed by pundits, politicians, sensationalist media, and the generally uninformed, for the accident that killed a family in California sparking the recall, has been cleared. Toyota comes out blameless, driver and dealer error in supplying the wrong floor mats, and not securing them caused the deaths.
The TPS disciplines which spawned the “Lean manufacturing” movement that has transformed manufacturing worldwide took over when the furor broke, and Toyota went looking for facts, seeking a “root cause” of the so called “Sudden Unintended Acceleration” problem, and finding nothing, commissioned unimpeachable outside engineers (NASA) to have a look, and predictably, they found nothing either. Meanwhile, the public was blasted by messages undoing 30 years of effort that positioned Toyota as a safe, finely engineered vehicle that would deliver performance and reliability for many years.
Toyota forgot that perception becomes reality, and by allowing the perception of their failure to remain in the market while they exercised TPS disciplines to seek a root cause error, consumers turned away. It will take a very long time, and a lot of effort to undo the damage not of their making.
There is a lesson for all marketers in all this, perception becomes reality, and it is hard to undo, even when the perception is wrong.
Feb 8, 2011 | Change, Collaboration, Lean, Operations
Typically, we see things in an “either/or” context, you can do one thing at the expense of another, take your choice!. You can have line efficiency, or line flexibility, not both, advertising reach or frequency against a narrow target, but not both in the advertising budget, covering inventory requirements of A, or B by the end of the week , but not both. Happens very day.
This trade-off is programmed into us, but has the unintended consequence of “allowing” shallow problem analysis, facilitating our “jump” to a conclusion, rather than going through the hard work of real problem articulation, consideration of many possible solution options, and the testing and recalibration of hypotheses that should occur and re-iterate to identify where more data is needed, more ambiguity dissolved, and more responsibility taken.
When was the last time you acted too soon, and laid all your bets on a single obvious solution being the right one, only to find the siren song of “easy and obvious” led you astray?
I first came across this phenomena in the late 80’s (to my younger readers, some of us were working then) when my then employer was running “Ski” yoghurt down a new form/fill/seal machine designed for long runs to meet the demand in France, where the machinery was made. Run raspberry yoghurt for a few days, and it worked wonderfully, great in France, but for us it would have been a years stock, so we had to change flavors after little more than what would have been a changeover run in France, in many cases, less than an hour, with the attendant changeover times and start-up/finish-run inefficiencies, which the French engineers assured us were “absolutement” unavoidable.
Over a period of time, in a structured and progressive way, our fitters and operators who ran this piece of French engineering revenge on the rest of the world, using what would now be described as a PDCA continuous improvement cycle, made that machine do what its makers said was impossible, and we got both efficiency and flexibility out of it.
Either/or was not good enough, progressively, with many small steps, a great deal of experimentation, and recognition that the operators often had a better view of the intricacies than an engineer working off a plan, it evolved it into a “both/and” machine.
As a result, we made pots of money, because we had very low inventory levels, almost 100% order fulfillment , and an increasing market share because our customer service to big retailers was better than our opposition, and the consumers loved the product. Truly a lean virtuous circle!
Jan 31, 2011 | Branding, Lean, Operations
I’ve written a bit over time about the value of a unifying business purpose, the way it can unify and motivate the stakeholders of an enterprise, often beyond the boundaries of just employees.
It is all easy to say, but apparently very hard to do, as the number of mission statements, and articulation of business purpose that are around that are no more than a bunch of cliches written on a whiteboard in some strategy session simply because it is on the agenda of things to get through.
Tom Fishburne again nails the notion of business purpose as a cliché in this cartoon, one picture tells the story of most efforts.
The video embedded in the copy around the cartoon is worth a look, it articulates via the story of Raleigh jeans the value of a real purpose as opposed to a confected one. The video also addresses the notion of manufacturing being brought closer to the geographic source of the business purpose, another hobby horse, as I see the beginnings of supply chains contracting around local capabilities, rather than being outsourced for apparent short term cost benefits, without understanding the long term implications.
Jan 27, 2011 | Change, Collaboration, Customers, Lean, OE, Operations
Lean is at its core a management system, a holistic way of looking at the way an enterprise manages itself through a culture tuned to improvement, group and personal responsability, while six sigma is a quantitative process of managing in quality by getting it right first time.
Six sigma quality requires 99.997% perfect, or 3.4 defects/million. When you are manufacturing and supplying to customers even simple products, this is a very high bar indeed.
Motorola was the first US company to recognise and articulate the challenge in the face of Japanese competition in the 80’s, and they boomed, becoming the gold standard for western manufacturing, and inspiring thousands of others to lift their performance, from which we have all benefited. The article that first bought Motorola to public attention is this Fortune article from 1989, and it started a revolution.
Now the revolution appears to be over as Motorola is broken up into two separate listed companies after almost 2 decades of failing to build on the foundations built in the eighties. The leadership that followed those that built the foundation did not recognise the importance of the management systems necessary to support the continued improvement and Motorola fell back into the trap of conventional management accounting where inventory is an asset, cycle time and flow ignored as core metrics, functional management over-rides bottom up innovation, and all the other stuff that makes a lean environment work, got squeezed out.
As I work with clients on improvement initiatives that usually start with marketing and strategy, my patch, the necessity to improve operational processes to support those that engage with the customer is always a major driver, and the failure of Motorola after being the icon it was simply drives home the difficulty of not just improving current performance, but in the process, building the management and leadership processes that make the performance improvement process self sustaining.
