The formula for success is to identify value as the customer defines it, and focus your efforts on enhancing that value, while eliminating efforts and expenses on anything that does not add to that vale. Straightforward enough, and the challenge is really in defining value. Whether you do so through your own lens, however, or whether you can actually see how value looks from the customer's lens is – to steal a phrase from Mark Twain – the difference between lightning and a lightning bug.
Here we have a group of folks in New Zealand who understand the basic principle very well:
"Mr Agius said that 'lean manufacturing' had a simple set of concepts. It identifies the fact that 'customers will not pay for the mistakes or activities that doesn’t make their product more complete, but only for the value of the product or the service they receive. The impact on this thinking is huge on the manufacturing process. … It made people define value of the product from the customer’s point of view, not from the internal manufacturing point of view.'"
You can't state it much better than that. But they fail in the execution – the looking at it through the customer's lens. These guys are in the paper industry and gist of the article is to rail against Genesis Energy – the big residential utility company in Kiwiland – accusing them of "for their own personal/financial reasons attacked our industry by asking their customers to silence the felling of trees that manufacture paper and silence the noise of printing machines by receiving their account online." Now I can't speak for the Genesis customers in New Zealand, but from my own standpoint I get and pay as many bills on line as I can, and it has nothing to do with the environment or for the "personal/financial" benefit of my utility providers. It is because it is easier and I am basically lazy. I suspect a fair number of New Zealanders share my slothful bent, and find it much more convenient to manage their genesis account online and not have to mess with a lot of paper.
I envision the folks at Blockbuster video thinking along the same lines. They probably had a lot of great discussions and took a lot of difficult actions to increase the value provided in their stores. Only they missed completely the fact that the value in the eyes of the customers is only the electronic pixie dust that hits the back of the TV screen making a movie appear. The bricks and mortar of the stores added no value, so any effort to enhance the value provided in them was an utter waste of time, money and effort. The fact that video stores are doomed to extinction has been know by Blockbuster customers for a long time, as is the inevitable disappearance of paper billing and mailing checks.
The same obstacle is dragging the manufacturing software industry down into a tar pit. I was recently asked by one of the biggies (a confidentiality agreement prevents me from naming them) to help them understand why companies have less interest in their products as they become lean. It has thus far been an utter waste of my time and their's as they are unable to see manufacturing without ERP as the starting point. Like the paper guys and the video stores, they seem to have so much invested personally and professionally in the way things have always been that seeing things from outside eyes is simply not possible.
Of course this is nothing new. The same human challenges explain why Western Union did not become the telephone company when phones replaced telegrams, and why the saddle and buggy whip makers did not morph into auto suppliers.
I have never been a believer in innovation as the core strategy for manufacturers, but when basic innovation in the industry whacks you on the side of the head – a sea change is occurring in how value can be delivered in a radically less wasteful manner - you have to pay attention.
VA/VE – Value Analysis and Value Engineering – may be old fashioned ideas but the fact is that they are as valid now as they ever were. Lean is all about optimizing the value proposition, and they are essential tools for making that happen. You have to see things from the customer's eyes, however, or neither lean nor VA can save you from yourselves.
david foster says
Good post, Bill. I’d observe only that the best strategy for the saddle & buggy whip makers was not necessarily to morph into auto suppliers, but possibly to do something entirely different to leverage their skills with leatherworking, etc…maybe gloves or handbags. Strategic movement can be along process lines as well as on market lines. See Mike Hammer’s thoughts on this, here.
In the case of the paper company, it would probably make no sense for them to turn themselves into a supplier of on-line billing systems…maybe they could have done this in 1996, but not now. So what they need to focus on is uses for their kind of paper that are *not* affected by the Internet…and if there are none, such, figure out what *other* kinds of paper they could possibly make.
Lost in the Northeast says
I can think of one use for paper that will never be replaced by an electronic version…
In the meantime, that paper products company is merely reacting to the change taking place much like individuals react to changes we impose upon them–all for their own benefit, we assure them. Change management is difficult on an individual or small group basis, so why do we label large organizations that find it difficult to change dunderheads? Neither people nor organizations can do what they don’t know how to do and often their resistance to change comes from FEAR. Help them overcome that fear and you are more than halfway home.