Goldilocks, Variety of Demand and Nominal Value

February 28, 2011 Tripp Babbitt 1 Comment

The Three Bears - Project Gutenberg etext 19993

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The variety of demand in service is one reason it differs from manufacturing. This is a subject I have talked about before. In service, the customer brings variety and the aim of a service organization is to understand what matters to customers (their nominal value). A manager for a client of mine came up with the analogy of Goldilocks and the Three Bears to describe the relationship.

You know the story of Goldilocks. She finds a house that is empty and different types of porridge, chairs and beds until she finds one that is “just right.” So it is with customers that are provisioned service they want service to respond to what matters to them, not the standardized process that they get when they interact with an industrialized, mass-production service provider.

Customers want it “their way” and not providing it in the manner they want it stands to increase costs through waste like failure demand. When customers don’t get what they want . . . they either don’t do business with you or complain. In Taguchi terms, when service organizations don’t provide for a customer’s nominal value there is economic loss.

Key to understanding a customers nominal value is first understanding your service organization outside-in (customer’s perspective) as a system. Understanding customer demands that are placed on the organization helps us define and refine customer purpose. Measures emerge that are significant to the customer.

Measures like end-to-end time for certain types of services are important to customers. But each customer or group of customers sets their own nominal. Only by going to the points of transaction can we listen to the demands placed on service organizations by customers and learn what their nominal value is. Just like Goldilocks wants things “just right” so do your customers.

Before your service organization heads down the industrialized approach promoted by today’s management fads, consider designing or redesigning your service system to one that truly differentiates you from the pack . . . or would that be a sleuth?

Join me for the International Deming Conference in New York City on March 21 – 22.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public). His organization helps executives find a better way to make the work work. Read his articles at Quality Digest and his column for CustomermanagementIQ.com Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected]. Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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Outsourcing, Shared Services, Systems Thinking and Government, Systems Thinking and Management

Management vs. Labor – Bad Omen for the US

February 24, 2011 Tripp Babbitt 3 Comments

Anyone hoping that the US is on the road to recovery has to take a step back. Governors blaming government workers for “outrageous” salaries and pensions. Management blaming unions for the ills of being uncompetitive . . . if that were only the case. Each own some responsibility, but the lion’s share of the problem is with management.

Unions and workers bear some responsibility, but management has hacked and sawed its way through cost-cutting to international uncompetitiveness and large government deficits. Management bears the burden of creating work designs with waste and sub-optimization, and unions have locked in the waste with contracts based on poor design.

In a country that now, more than ever, needs cooperation between management and workers to compete against more savvy international organizations (like China, Japan, South Korea, etc.) we have instead pointing fingers of blame. This will go nowhere and while other countries grow, we are left fighting and blaming each other for the shrinking pie of prosperity.

The fact is management needs labor and labor needs management. The two are inextricably tied together and the fortunes of the US rely on better management thinking and work design and an engaged workforce that can make decisions and identify opportunities. Both elements have skin in the game and until they realize this, the US has little chance to be a player on the world stage.

Where management needs to change thinking is being so fixed on costs that they miss the causes of costs. Too many management decisions begin with a plan rather than knowledge. Knowledge of the work is with laborers and decisions need to be made with knowledge.

Pointing fingers as if labor is to blame is a bad start for any management . The adversarial and long-term hard feelings are sure to make the task harder for cooperation needed to reverse the trend. Management and laborers now have new reasons to hate each other.

Labor has been under fire with stupid management tricks like outsourcing and shared services, looking to reduce costs they increase them. Misguided by mass-production-, industrialized- and economy of scale-thinking. They miss the real costs associated with flow (or the lack thereof).

Indiana, Wisconsin and more state governments will follow the wrong strategy to reduce labor costs assuming the government work designs are optimal. Government and private industry would do well to engage workers to help fix flow and eliminate waste rather than pick fights. The pot of gold they seek from benefit and wage cuts is much smaller than the hidden huge opportunity to fix their systems.

Join me for the International Deming Conference in New York City on March 21 – 22.

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Systems Thinking and Management

Those Annoying Two-Year Cell Service Contracts

February 21, 2011 Tripp Babbitt Leave a comment

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I am the guy who likes a cell phone that does what I want it to do. Getting my email, calling or receiving calls, web and the occasional game of Break-Breaker are about all I need. So the three generations ago Blackberry World Edition works perfect for me.

Recently, my track-ball stopped working and so I got a replacement, but not without some arm-wrestling with the sales guy that wanted me to “upgrade” to a BlackBerry Bold. It slices, dices and probably will crawl on its belly like a reptile, but to upgrade I have to sign that stupid collusion (yes, seems all carriers have it) contract for two-years.

OK, maybe I am missing out on a camera phone (which seems to come in handy in places like Bahrain and Wisconsin). But I am not sure I have need for 4G, which I am sure makes things faster, but why do I need faster? This may be someones need or want, not mine.

Customer service with my current carrier (Sprint) is always entertaining and rarely good. They say it has improved . . . haven’t noticed or heard particularly good things about any carrier with regards to customer service. Often Sprint sends me from a “sales center” to a “service center” when I have problems with my phone. Shouldn’t any location be a service center?

Back to the two-year contracts. I have heard all the excuses about recovering costs and planning as the need for contracts. Maybe if I got good service, I would want to stay. But when you treat me poorly, I should have the option to leave the relationship, I am the consumer.

With contracts come early termination fees (ETFs) and the Utility Consumers’ Action Network (UCAN) has website on the fees charged by carrier. It makes me wonder how much failure demand these carriers get in complaints from consumers.

It is frustrating moving from one bad carrier to another and to have to pay for the privilege is maddening. How about improving the service first and then people won’t want to leave. Obviously, these carriers take an inside-out approach which will cost them money or business. A better path would be to acquiesce to these customer demands and provide what consumer’s want , the way they want it. The first carrier that does, will win the market.

Join me for the International Deming Conference in New York City on March 21 – 22.

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Systems Thinking Concepts

Process Improvement – The Wrong Thing, Righter

February 16, 2011 Tripp Babbitt 1 Comment

“All of our problems arise from doing the wrong thing, righter”

-Russell Ackoff

Service organizations have long embraced process improvement to fix their problems. The most popular fads have been lean and/or six sigma to enable process improvement. Large organizations have whole elitist groups to facilitate such efforts.

Charged to improve processes with limited scope and thinking by management, these teams kick off projects that must bear a return. So, they go out find some low-hanging fruit and check the box of improvement. This allows the team to celebrate and claim victory. Pizza party for those involved.

Been there . . . done that. Process improvement is not system improvement, not that some don’t try to be. But when teams:

get no or little executive involvement (beyond sponsorship),
don’t focus on changing management thinking,
and don’t redesign the work end-to-end,

we wind up with process improvement that has little real improvement or damaging effects on the entire system. This comes in the form of waste and sub-optimization. It’s like wetting your pants, you get that warm feeling at first, but really are only left with a mess.

Systemic improvement begins with getting knowledge outside-in as a system. This means understanding the customer purpose of the work we do and adopting measures from this purpose and redesigning the work to achieve this purpose. Anything else is really just top-down, inside-out command and control thinking and efforts.

Management has to have skin in the game to get a normative experience to see the damage of their thinking on work design. Without a change to thinking systems will revert back to the original state or, more likely, entropy.

Unfortunately, most improvements are of the process kind. Management has little desire or motive to change and so process improvement becomes acceptable and comfortable. So those that need to change most . . . management are left out and business improvement becomes marginalized.

Join me for the International Deming Conference in New York City on March 21 – 22.

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Outsourcing, Shared Services, Systems Thinking and Technology

Why Apple Really Isn’t Cool

February 15, 2011 Tripp Babbitt 2 Comments

Recently, I was reminded of the plight of the worker as America is saddled with high unemployment. As an American icon, Apple has become what is wrong with our labor picture. The innovation giant and its success has not had the trickle down affect of labor employment. They, like so many others, have shipped their labor overseas and the accompanying lack of manufacturing job creation leaves America both less wealthy and less innovative.

Without labor to make Apple products, we are missing future opportunities to innovate from knowledge gained from making the products. Maybe antenna-gate would never have happened. Labor is an integral part of the system as the Apple Genius Bar.

Our elitist mind-set has us believing that management, lean six sigma black belts and project managers are more important than those that do the work. Labor is treated as a commodity that should be negotiated for the lowest price.

And it isn’t just traditional labor that is getting the shaft. Contact centers, software developers, HR, finance and even research scientists are being outsourced, shared and marginalized. This leaves no labor that can actually create value in the eyes of the customer in manufacturing or service.

This is a disturbing trend and the root of some of the unrest we have seen in the Middle East. When jobs aren’t available, political upheaval is in the future. The problem is . . . the future is now.

Apple for all its success is a beacon for what is wrong with America. They return high profit with cheap labor and their success has created a whole new generation of misguided thinking. The economy of scale and mass production thinking blinds them to better ways to design and manage work.

It is American management that has marginalized the worker with poor work design and thinking. Apple, as the great innovator should have long come to understand and embrace this as fact.

This creates a paradox for Apple as their biggest customers are right here in America. With all their labor outsourced, who will be able to afford their products in the future?

Join me for the International Deming Conference in New York City on March 21 – 22.

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Systems Thinking and Education, Systems Thinking and Government, Systems Thinking and Management

Let’s Design a Code of Ethics into Our Systems

February 14, 2011 Tripp Babbitt 1 Comment

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Harvard, the master of all things business, status quo and losing touch with reality in its MBA program, is making a shift. The shift is to revamp the curriculum in the wake of the financial crisis. The elitists even recognize the pendulum has swung too far, so the response is predictable . . . we now needs ethics.

This discussion can get into religion and politics which is a road to nowhere. Even the most ethical base their decisions on faulty theory. Rewards and incentives drive behavior, but too often the wrong behavior. I have seen owners and presidents of Fortune 500 organizations turn a blind eye to dysfunctional activity and then blame an individual for gaming the system to get a reward.

Who is responsible for that system that encourages cheating and damaging behavior?

The same executive and owner that promotes the bonuses and boondoggles to their staff. What did you expect? The employee to say, “No, no bonus for me this year.”

Ethical by design should be our aim. Building systems that accommodate doing the right thing. When our focus is on targets that become the defacto purpose of our work, we risk everything.

However, when our focus is on the customer there doesn’t have to be bad behavior. Think about it, no laws to pass to protect the consumer and no outcomes that damage the economy. The paradox is that focus on the customer actually creates more profit. It’s all the junk we are forced to do to mitigate risk that creates costs.

Designing our systems outside-in with the focus on the customer creates more profit, less need for regulation and happier customers. We are saved from enduring educational institutions that have to walk the tightrope of ethics classes.

Join me for the International Deming Conference in New York City on March 21 – 22.

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Systems Thinking and Technology

Dismantling the Information Technology Monoliths

February 1, 2011 Tripp Babbitt 4 Comments

Before technology was cool . . . OK, maybe that is too far back for technology. How about before information technology (IT) was cool, there were manual processes of paper and people. The advent of the computer and the advances of telecommunications have allowed much to be accomplished . . . and not all of it is good.

Service organizations adopting technology did so in the name of automation and modernization. Why have paper when we can have information technology? Or, why have people when we can have information technology?

Salient questions that have created more hype than good sense in the answers to them. IT has become management’s monolith – huge structures that rival the pyramids for the modern day executive pharaohs.

However, the unquestioning embrace of IT as the “answer” to all things manual has led us to more bureaucracy and greater complexity. Neither being optimal for customers or those front-line staff that have to interact with them.

Why is this so?

Two major reasons are the design of the work was never optimal and in order to make IT work we have had to expand how to manage IT.

The design of the work into front- back and sometimes even middle offices goes unchallenged. This is more the mass-production and industrialized thinking of manufacturing . . . which, by the way, has not worked well since W. Edwards Deming visited Japan to show them a better way. The US now struggles to compete in manufacturing at all. Wrongly thinking that cheaper labor is the key and not the design of the work. Service has embraced this thinking of yesteryear to add costs and miss the point about the causes of costs.

The second reason for IT is the structures (monoliths) we have built to control IT costs. Yet, they drive costs up.

The explosion of IT has brought us the project manager and projects to keep costs under control. But no one questions the costs of project management. They do offer us ways to check up on those “always behind” developers and we all love those Red-Yellow-Green reports that tell us nothing associated with what is really going on.

Before project management, we had business analysts that in EDS were originally part of the path to become a software developer. Now, the BA position is an end in itself to make a production line mentality complete. BA gets the requirements and the developer codes. Besides good developers are costly and should be hidden away and they don’t know how to interact with business folks – ahhhhh, I knew there was a good reason.

Let us not forget about governance, good management of IT means good governance. We have to have standards, plans, priorities, reports, risk management, fiduciary responsibility, etc., etc., etc. And now one begins to wonder how it is IT is actually saving money?

Plus in many large organizations trying to get an improvement through IT or fix something is such that . . . a snowball would have a better chance in Hades.

Maybe it is time to rethink IT, what do you think?

Join me for the International Deming Conference in New York City on March 21 – 22.

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Tripp Babbitt’s Blog

Monthly Archives: February 2011

Goldilocks, Variety of Demand and Nominal Value

Management vs. Labor – Bad Omen for the US

Those Annoying Two-Year Cell Service Contracts

Process Improvement – The Wrong Thing, Righter

Why Apple Really Isn’t Cool

Let’s Design a Code of Ethics into Our Systems

Dismantling the Information Technology Monoliths

The 95 Method