Tag: value added

What Customers Really Want

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As organizations and organizational units adopt more customer-focused strategies, there is a need to better understand what customers really want.   Although firms can invest years and decades in marketing research on this question, they can also choose to obtain 90% of the value in a single day by facilitating an honest discussion with key leaders and customers.

 Those who have adopted the quality/process view believe that the first step is to confirm that customers mostly (only) care about the perceived value of final results.  They will pay for a value added process or feature, but don’t care about other activities.  Richard Schonberger proposed that all customer needs can fit into a small number of categories, which can be used to define and prioritize the findings.

Customers value final product or service quality.  More today than before; and more tomorrow than today.  Some customers value process quality, because it reduces their risk, serves their customers or is required by regulators.  What quality level is required to remain in business, to meet expectations or to differentiate a product?

Customers value delivery speed.  Product lead times have fallen from weeks to days to hours to minutes.  Service delivery is sometimes measured in seconds. 

Customers value flexibility.  They expect your firm to have the capacity to meet their orders within standard lead times.  They expect you to make exceptions.  As in the Pink Panther movies, they may agree to a standard lead time or capacity, but when they need an exception, they want you to ignore what they told you before.  Expectations regarding flexibility vary widely across industries and firms and can change rapidly.

Customers seek value.  They want lower prices or total cost of ownership.  They want features and benefits that are cost-effective, which meet their needs or which are market leading.  This is a very broad category, but firms must operate with some understanding of what is expected.

Customers value information.  They want business relations with clear information flows, minimal transaction costs and shared accountability for risks.  Ideally, you anticipate and fulfill their needs in a cost free way, without surprises and take care of surprises of all kinds: regulatory, supplier, customer, competitor, acts of god, etc.

Finally, customers value personal relationships.  This varies by culture, industry, firm and purchasing agent.  Business relations are rarely purely business relationships.  Personal connections, loyalties, favors, culture and understanding often matter.

Firms or business units should understand what their customers want.  They should identify minimal, expected and differentiated performance levels.  They should understand relative customer priorities.  This may require formal marketing research or trial policies or pricing exercises to determine real preferences.  This may require sales, marketing, engineering, production and finance to work together like never before.

A consensus one-page QSFVIP customer profile can help to shape decisions at the strategic and tactical levels.

The Quality Paradigm

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The Quality paradigm has emerged as a significant competitor to the Financial paradigm.  The Financial paradigm says that organizational results are best delivered through the sum of individual rational decisions focused on incremental costs and benefits.  The Quality paradigm agrees that costs and benefits matter, but focuses on the underlying process as the primary driver of minimizing inputs (costs) to produce a given output (benefits).  The Quality paradigm has evolved from the “scientific management” studies of “time and motion”.  It has a process engineering focus, aiming to optimize the relationship between inputs and outputs.  Improvements are inherently valuable, without tallying financial valuations.

The Quality paradigm made progress because its effectiveness in Japanese manufacturing became apparent by the 1970’s.  It also gained favor because Western organizations, relying on the financial decision-making tools, were clearly not delivering optimal results. 

The Quality advocates made five major criticisms of the existing practices.   The practices greatly underestimated the total cost of poor quality at 1-2%, while the total costs ranged from 5-10%.  The financial approach often created a cost reduction mindset when greater opportunities existed for improved revenues and margins through quality products and customer service.   The marginal approach overlooked less material cost reduction opportunities that were very significant in the long-run.  It optimized individual functions, while ignoring connection costs.  It underutilized the assets of workers who could make improvements.  While some of criticisms were misplaced or exaggerated, the Quality Paradigm presented a compelling story that lead to changes.  The new, process-based approach was delivering value that the old approach had missed.

The Quality paradigm delivered several insights that could be repeatedly applied to reduce costs, reduce defects, increase volumes, increase timeliness and better meet customer needs.  First, a controlled system inherently reduces errors and risks and leads to improvements.  Second, examining a whole process in terms of well-defined desired outputs focuses staff on the greatest improvement opportunities.  Third, the key to understanding process failures is through understanding the drivers of variability.  Fourth, variability naturally accumulates through a process, leading to greater defects and costs.  Fifth, inventory of time and goods hides current performance and improvement opportunities.  Sixth, there is no practical limit to the improvements possible in reducing variation, reducing defects or improving input/output ratios.  Seventh, a quantum leap process break-through is usually possible.  Eighth, in the long-run quality improvements usually have a net benefit, rather than a net cost.

In the last two decades the Quality paradigm has come to complement the Financial paradigm, leading to a balanced scorecard approach to strategic planning with both financial and operations measures in the performance dashboard.  Finance continues to emphasize costs and benefits while Quality focuses on the underlying processes.  This combination approach is delivering more valuable results for most firms today.

Effective Leaders

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 Everyone has their own theory or theories of leadership.In my experience, effective leaders …Are authentic expressions of their unique talents and experiences. They are  
 independent and non-conformist. 
 
 Are shaped by their personality profiles.  They leverage their strengths and minimize their non-talents.  They flex styles for short periods, with effort.
 
 
 Are true to themselves, applying constructive approaches to work, home and community.   This natural style leverages their assets.
 
 
 Are internally driven and project a clear commitment to making progress, overcoming 
 challenges, reaching goals and making a difference. 
 
 Are human with strengths and non-talents.  They are effected by biases and paradigms.  
 Self-awareness and self-control are partial. 
 
 Recognize the strength of organizational and cultural inertia in preventing change, 
 alignment and pursuit of lofty objectives. 
 
 Accept the political nature of organizations and the role of self-interest as part of the natural arena for leadership practice.
 
 
 Understand the value creating role of key leaders in organizations, but do not minimize the value of managers and staff.
 
 
 Appreciate the social psychology of organizations and teams.  They demonstrate their 
 passion, commitment and belonging in real and symbolic ways. 
 
 Use an interactive decision-making process to engage contributors, frame 
 decisions, generate options, evaluate solutions and build commitment. 
 
 Are patient, unstructured decision-makers.  Organization level issues, plans and policies 
 require time to define, analyze, choose and embrace. They change perspectives, urge 
 creativity, challenge traditional answers and encourage contrasting paths to answers. 
 
 Value the contributions of professional specialists, but employ a generalist perspective and 
 healthy skepticism. They employ various facilitation tools to work through ambiguous 
 situations. 
 
 Employ a broad array of skills and experiences, as decisions are increasingly complex, 
 including political, ethical, global and environmental dimensions. 
 
 Embrace a modern approach to diversity, deeply understanding the value of diverse 
 perspectives in contributing their piece of the truth to decisions. 

Value of Public Libraries

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The century old consensus regarding the value of public library services is increasingly
questioned.  Rising costs, anti-government sentiments, accountability demands, on-line
materials delivery, an increasingly individualistic and commercial society, and reduced
public funding combine to challenge libraries to clearly define their services, respond to
public demands and justify their very existence!
 
Libraries need to build upon their historical strengths to clearly define the value they
provide, measure ongoing progress and actively promote their value.
 
Libraries deserve public support because they deliver value:
 
1) Economic ROI of 200%+ compared with 10% returns for private capital.
 
2) Near-zero incremental cost personal growth with positive spillover benefits to the
community, leading to an improved quality of life for all citizens.
 
3) Libraries support the effectiveness of our democratic society, building universal
literacy, access to education, information and interaction opportunities.
 
4) Libraries serve as a physical embodiment of the community’s belief in itself.
 
1) Economic Returns
 
Materials can be used 30 times, rather than once.
Materials in all categories achieve targeted usage rates.
Services ensure that all age, socio-economic status and geographical groups benefit. 
Higher cost materials providing value to many patrons.
Lower demand materials are used by many individuals, schools and libraries.
Librarians maintain specialized knowledge of value to patrons.
Materials are professionally selected to be of highest value to patrons.
Short-term demands and long-term portfolio needs are balanced.
Libraries deliver highest demand services, creating a community asset.
 
2) Personal Growth Gains
 
Access to individual paced personal and career growth materials.
Develop a love of reading and learning in all students.
Facilitate an interest in life-long learning in adults.
Access to life-long professional growth.
Opportunities to explore materials of interest.
Opportunities beyond areas of mastery to explore diverse topics and cultures.
Provide adults with introductions, exploration and mastery level experiences beyond
careers, professions and economic progress.
 
3) Civic Benefits
 
Develop general, economic and political literacy.
Materials represent all sides of public policy issues.
Promote the core views of the American public, educating immigrants.
Offer diverse viewpoints, encouraging the general public to consider their views.
Sophisticated access to all materials and viewpoints.
Historical and contrary viewpoints on current issues to ensure full consideration.
Training and experience to evaluate claims from proponents of all views.
Encourage low income/resource individuals to use the library for personal growth.
 
4) Community Benefits
 
Spaces for community meetings.
Promotion of personal and community growth.
Common learning experiences unite diverse elements of society.
Opportunities for volunteers, donors, advisors, respondents and citizens.
Opportunities for intergenerational interaction.
A positive view of the future through progress.
 
Summary
 
Libraries face threats to their public funding.  By adapting programs, delivering value
and informing the public, libraries can continue to fill their vital value added role for
society.