A core concept of lean is that value is defined from the perspective of the customer, and therefore waste is as well. We are familiar with both types of muda, waste that is unnecessary and must be removed and waste that is necessary perhaps due to regulations or inspection (be careful with that!), as well as mura (irregularity) and muri (overburden). These drive the seven, or eight, forms of waste.
But how many of us have metrics that are aligned to that customer-centric perspective?
Gene Cornfield described this realignment of metrics and KPIs, which he calls CPIs – Customer Performance Indicators, in a Harvard Business Review article a couple weeks ago.
A growing number of organizations are becoming more customer-centric by adopting, measuring, and optimizing CPIs — whether their customers are consumers or business buyers. And because customers are the one and only thing that fuel growth, how well a company performs against CPIs often serves as the most powerful lever for, and the most accurate predictor of, growth.
Sure, sales is inherently from the customer perspective as it demonstrates that customers have purchased. But sales is also a lagging indicator, with a lot of components that may mask true true potential value. Do they have to buy from you because you’re the only supplier? If so, and they don’t believe they are receiving appropriate value for the price, they will be cultivating alternatives. Unless considerable effort has been spent understanding value, it’s likely that price, and hence sales, does not adequately represent value.
Continue reading on the Gemba Academy blog…