Improvement should be based on the Customer View of Value


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My discussion with Mike Bremer,President of The Cumberland Group focused on understanding what really drives and sustains improvement. Mike had some great perspectives and I have included just one of them below. The entire transcript and podcast is available at The Improvement Trap.

Joe:  Well, you started out with something that I just thoroughly believe in and one of these things that  just jumped out at me. Whether you call it customer focus or customer value, it’s your value proposition in your customer eyes that have to drive your improvement to make a difference. That says a lot.

Michael:  Well, it does, yet it’s funny when you, let’s just talk about Lean, the Toyota Production System which is a very powerful improvement methodology. Most people, when they’re doing an improvement project, they’ll do a value stream map or process map. They certainly look at the steps that add value from the customer’s eyes for that particular process. And, they’ll go back, and they’ll try to eliminate the waste.

But, how often do you do that for the overall business? What are we doing with the business? I mean; most people focus with the staff on a project by project basis, not really what’s the best thing we can do for creating value.

Let me share just a mythical story. I was not here for these conversations, but here are two stories about creating value. There’s this company in Asia, and somebody comes up with the idea that wow, look at what these baby boomers are doing. They’re buying a lot of new, hot cars. We really don’t have any cars like that. Maybe we should do some kind of car that the baby boomers want to buy. They’re talking about it, and they decide, they’re going to do that.

Somebody else in this company says well; you know, the way that people buy cars really, it’s an ugly process. People just don’t like buying on the car dealer and coming in and doing all those negotiations.

While we’re doing this new car thing, let’s create a whole new buyer experience. We’re not going to do this through our existing distribution chain. We’re going to create an entire new chain to do this. Lo and behold, you have Lexus. They completely redefined the customer buying experience.

Now, there’s a competitor of Lexus that’s in Detroit, and they see what Toyota’s doing and they say, “Well, wow look at those guys. They did this new luxury car thing. Maybe we should do a luxury car thing in our business.” Somebody else says, “Oh, my God. No, we can’t do that because that would hurt Cadillac if we do that.

So they’re quiet for a little bit. Then somebody says, “Well, we’re pretty bad at doing small cars, let’s do this to small cars, and we’ll create this whole new customer buying experience with small cars.” With all due respect, to the people at Saturn who busted their butts to try to do the right job, the strategy is doomed from the start. And why is that?

Well, what do the margins look like on a luxury car? I mean; they’re like a foot high. You make a lot of money if you’re selling a luxury car. If you’re selling a small car, the margins are in the pennies. You’re looking at pennies on the car. The strategy is doomed. Now, let’s go back and talk about what are we trying to do to improve the business?

Well, if I’m focused on the right value, what it is that we were doing, and the organization can make money on it; we’re… I can think have improvement projects that are going to relate and will do well. Whereas if you’ve got a value proposition there, the probability of its working is so low, you can’t improve it enough.

Most people they don’t link their improvement projects to that value proposition. We find things to improve, but it’s not really driven by a strategic perspective for the customers. Long answer but that’s how you think about it.

Related Podcast and Transcription: The Improvement Trap.

Republished with author's permission from original post.

Joseph Dager
Business901 is a firm specializing in bringing the continuous improvement process to the sales and marketing arena. He has authored the books the Lean Marketing House, Marketing with A3 and Marketing with PDCA. The Business901 Blog and Podcast includes many leading edge thinkers and has been featured numerous times for its contributions to the Bloomberg's Business Week Exchange.


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