Of course to determine the best way to run the business, management has to look outside and inside the organisation. But for me, looking externally to understand what customers value is the priority. What it is about the products, services, service-levels, quality, price and location that influences customers’ decisions to do business with your company?
Apply efficiencies only to effective operations
If we think of effectiveness as “doing the right things” and think of efficiency as “doing things right” then surely it’s a waste to apply efficiency improvements to operations which aren’t directed in the right way. Company owners and managers hire me to help them uncover and implement better ways to operate their businesses. Here I propose that making operational improvements should start with managers finding out from customers:
- what they truly value about the way their suppliers operate
- how well their business meets the customers’ expectations
Once a management team understands how its operations add value to its customers, then it can look internally and make changes safe in the knowledge the business will be both effective and efficient (lowest cost).
Finding out from customers need not be complex, expensive or time-consuming
The definition of “complex”, “expensive” and “time-consuming” is of course relative to the size and complexity of a business. Yes it’s important to analyse and implement more significant change to sustain a business in the medium and long-term. But if the thought of trying to better understand your customers is daunting then I’d suggest you keep it simple, at least initially. I’ve captured really valuable information simply by spending an afternoon on the phone. On behalf of my clients I’ve asked their customers what’s important to them and what my clients’ operations do well and less well. This approach can be either structured (a consistent set of questions) or unstructured (an informal, open chat). The most important point is to do something.
Segment the findings according to value and make the change
Probably you’ll get a range of intelligence back from this research. The next job is to segment according to its value (e.g. high, medium, low) and its ease of implementation. By analysing what’s expensive/hard verses what’s inexpensive/easy you’ll be able to get on with the higher value easy stuff (low-hanging fruit). Separately you can make investment plans for the higher value harder stuff. Crucially you’ll be able to ignore or postpone any work which the customers perceive as lower-value.
In the same way as I encourage managers to get on with the research, I also encourage them to get on and make changes. Often highly impactful change can come from very simple and inexpensive changes which are quick to implement … the “quick wins”. For one of my clients, customers consistently stressed the importance of quick turnaround of orders and deliveries which were right first time. They commended my client’s business on the former. However, they criticised that delivered goods were often sub-standard and/or damaged in transit. They commented that this led to delays in their own supply chain, added cost and disappointed customers.
Armed with intelligence on their customers’ needs and their strengths and weaknesses, I helped my client to look internally and make appropriate changes. In this case the problem was fixed with better staff training on how product was selected, loaded and transported. This increased customer satisfaction, increased repeat business and reduced the client’s costs of handling rejected goods. In two cases customers who had found other suppliers were persuaded to come back.
Look across the whole business and make it continuous
Irrespective of how a company defines its “operations” department or function, for this exercise I encourage management teams to regard operations as any production or servicing activity which takes place after a customer has placed an order. Why? Because this will ensure the operational review considers all the relevant functions of a business. It is not restricted to the company’s potentially narrow definition of “operations”. And just because their order books are full and profits are high doesn’t mean a management team shouldn’t start reviewing its operations straight away. By implementing a continuous, customer-centric approach to operational review the business increases the likelihood it will respond fast and smart when things go wrong. When market-wide conditions take a downturn it increases the chance it will respond faster and smarter than its competitors.
This approach works for all businesses oh and on a personal level too
The final beauty of this customer-centric approach to operational review is that it works at all levels. It’s as good for the multinational as it is for the micro-business and every size of businesses in between. Also it works at the personal level too. If you’re reading this thinking that it doesn’t apply to you because you’re not CEO then please think again. We all have customers: some of us deal with real customers who pay money to the business for goods and services; some of us deal only with internal customers – our colleagues for example. But they are all our customers so be sure to always know what’s important to them and to make the difference.
Julian Rains is an experienced consultant specialising in business improvement.