Service as a Commodity

May 26, 2011 Tripp Babbitt 1 Comment

An excellent post by Simon Caulkin called Not Customers but Commodities got my attention. It illustrates how customers are being treated like commodities. Technology, standardization or a combination of the two have left us feeling . . . shorted in the service we receive.

Efficiency has replaced sanity and customers feel it. Service organizations (public and private) have looked to their own bottom-line to “hit the numbers.” Meanwhile service to customers has deteriorated either rapidly or slowly, but does entropy.

Managers without fortitude or knowledge claim they are trying to balance profit and good service. The result is disastrous and preposterous. The false assumption is that there is a trade-off between good service and costs. The “zero-sum game” as I call it.

The truth is there isn’t a trade-off.

Good service delivered the way a customer wants it always costs less. Less handling and more revenue. Oh, and less marketing to service customers that don’t need to be convinced of your good service – because you are delivering it.

Absorbing variety in a technology, best practice, rules, scripted and standardized world is very difficult and the customers are left out of the equation. Like a product that is cheap but only lasts a few days, service is done in the cheapest manner at the expense of the customer.

The examples are many, like a contact center geared to answer calls that add revenue but put customers through the gauntlet when they have a problem. In an attempt to avoid costs, service organizations add costs. IVRs to navigate and back offices to negotiate . . . in a word it sucks.

The good news – for now- is that all your competition stinks too. Customers are mired in mediocrity or less and yearn for someone to actually stand out.

However, given the service systems companies have designed business improvement seems so far away. Managing costs over rules good service. If only service companies and governments understood that serving customers ineffectively is at the root of the causes of costs.

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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Economies of Flow for Service Design

May 24, 2011 Tripp Babbitt 1 Comment

Most service organizations are designed with economy of scale thinking. This is an industrialized, mass production mindset that is making service and government worse. Service designs require different thinking to achieve better performance.

Economies of flow is a much better way to design service. But this requires thinking outside-in and designing services that work from customers back into the organization – this is to achieve better flow.

Flow can then be evaluated by starting with customer demands. If a service organization has good flow than there will be less failure demand (demand caused by a failure to do something or do something right for a customer) or more demands that bring revenue – the kind we like.

Resolving customer demands “one-stop” has many different meanings. FCR (first call resolution – another name for one-stop) too often means that the service representative can’t do anything else. The reality is that the customer’s view is the only one that matters. If the customer doesn’t see it as one-stop, than to measure another way is just kidding ourselves. Bottom line is a customer demand is only resolved when the customer says it is.

To improve economies of flow requires designing out failure demand and designing in better flow for the variety of demands that customers present. And variety of demand is what makes manufacturing different from service. Designing service to absorb variety is key.

But it is economies of scale thinking that prevents service from breakthrough performance. The focus is on activity and reducing transaction costs rather than improving flow. The result of scale thinking is higher costs and unhappy customers.

Conversely, service organizations and government that embrace economies of flow thinking will achieve unprecedented improvement in performance.

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Facts are Stubborn Things

May 24, 2011 Tripp Babbitt Leave a comment

“Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence.” – John Adams

Image via Wikipedia

While watching the HBO John Adams series for the third time, I was impressed by many things that happened before the Revolutionary War. Most notably that John Adams made the above quote in defense of British soldiers that fired during the Boston Massacre. The provocation by the crowd was what caused the British soldiers to fire. The sentiment of the day was that the American settlers were being taken advantage of by the British and King George III. But the facts brought forward by John Adams during Boston Massacre trial helped shape law in the new land.

Today, instead of resentment of the homeland hierarchy that taxed goods, we are faced with a management hierarchy that concerns itself with position and not evidence or facts. The ability to make a decision is more important than basing it in fact. We are left in government with ideology and in business misguided thinking based on history, neither based in facts.

The problem with the management hierarchy is that they have lost touch with what is actually happening. Management reports and analytics have replaced knowledge instead of enhancing it. This is the price of technology, lots of information . . . but know knowledge.

Scant evidence exists that business improvement is achieved through work designs filled with front office and back office, shared services or even outsourcing. In fact, much of the evidence is that these things are poor designs based in promoting the existing hierarchy. That is management based in assumption rather than fact.

The current sentiment is toward those things that are outdated and changing thinking requires discomfort of management position. When hierarchy becomes more important than facts we have not only injustice, but reduced profits. Workers languishing in poorly designed systems that make little factual sense are perpetually stuck in a cycle of despair.

John Adams had it right in the face of unpopularity. Facts are truly stubborn things.

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The Problem with Budgets

May 19, 2011 Tripp Babbitt Leave a comment

Headline: Iran Attacks USA, but No Budget to Fight Back

News at 11 . . .

Well. That headline would get some attention. Robert Gates claimed that he can’t fight two wars on the budget he was given. Whether to fight two wars or not is the right thing to do is not the question I am addressing here. The question is whether the budget should dictate what we should do.

Needless to say, I am against all this focus on budgets. Because when we talk about budgets, we are talking about costs. Politicians are notorious for trying to reduce costs, but they wind up increasing them. Sometimes because of ideology and sometimes because they just hack away without knowledge of the systems they tamper with

. . . and this is the management paradox.

I am all for spending less, but in the words of W. Edwards Deming, “By what method?” There is no way that by congress or law that we have any chance to reduce spending without knowledge of where the waste is in any system.

Take a view that if we cut costs to eliminate our ability to fix potholes that their would be loss to the system. Cars with flat tires and people would complain . . . a lot.

The question becomes where to cut and that can only come with knowledge of what we are doing today. Not a line item on a budget. This is true for both business and government.

“Reduce expenses by 9%” to meet the budget is as stupid as the removal of the wrong arm in surgery. Managers have to be better and smarter than that to succeed. Executives with such mandates should tarred and feathered in public for offering up such ridiculous solutions to their problems.

Management needs to understand the dysfunction that is caused by the setting of targets with budgets. Does it get people’s attention . . . absolutely. Cut travel, cut unnecessary expenses, but what is unnecessary? Somebody is traveling for a reason.

It should be called “Corporate Stupidness.” As I have often seen managers saddled with such expectations wait for the “stupid period” to end, so they can get back to doing their real jobs.

All this caused by an arbitrary number that someone committed to during that investment call. This is just good business . . . except it is not. It is short-term thinking at its worse. Driving value out and expenses in over the long-term.

Budgets have long become obsolete, just when will managers discover their carnage?

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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Home Depot’s Service Lesson

May 17, 2011 Tripp Babbitt Leave a comment

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This isn’t new news, but provides an important lesson of the failure of six sigma during Bob Nardelli’s tenure as CEO of Home Depot. Like so many fads trying to find their way to achieve business improvement, this manufacturing initiated one is so yesterday. The problem is the mass-production, industrialized mindset that spills over into service.

Facts may be friendly, but not in a system that promotes manipulation to achieve the carrot or avoid the stick. Facts become secondary in these systems. Numbers just become white lies or damned lies . . . not facts.

As a reformed Lean Six Sigma Master Black Belt, I found the method too elitist or internally-focused to be effective in service. Not to mention that manufacturing and service have altogether different problems.

Six sigma’s project focus is all about reducing costs. The management paradox being that focusing on costs always increases them. Too often they wind up sub-optimizing through these projects by reducing costs in one area, but increasing in another. In a six sigma environment, reducing costs is the aim.

Although six sigma practitioners talk about the customer, most are too busy achieving savings. “The heck with the customer, I have to show money saved.” In service, the customer is the key. Services engaging in organizational change management devoid of studying customer purpose and demand, do so at their own peril.

People would be correct in assessing that the failure of six sigma is a management problem. But they have to realize that their is nothing to address these management problems in six sigma. Not addressing the fundamental thinking problems about the design and management of work leave us with more waste, costs and a demoralized culture.

When management continues its command and control ways, nothing will change for the better. Management has to play and change too.

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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The Truth about Why Lean Programs Fail

May 13, 2011 Tripp Babbitt 9 Comments

A recent white paper has the LEI (Lean Enterprise Institute) folks admitting that only 2% of lean programs succeed. Yet, with the masses of people that make up the lean community you would think that number was 98% of lean programs succeeding. I was surprised that the number of failures wasn’t higher than 98%.

This begs the question of why the hype for a fad with such a high failure rate? Shouldn’t it go the way of other fads that we at least had fun with like the Yo-Yo, Klackers and yes . . . even disco.

Jeff Liker and Mike Rother now have a new Japanese term for us to learn – Kata. Surely an attempt to shore up the missing element of lean called thinking. Why is it always a new Japanese word?

The thinking though is still lost on process improvement, routines and standardization. Not to leave out “target conditions” that Liker and Rother claim that a “clear path” to the target makes it OK to use results management and extrinsic motivators vs. those that have an unclear path need an iterative approach devoid of results and extrinsic motivation. W. Edwards Deming must be looking down and shaking his head with such foolishness.

The truth is lean doesn’t work because it is based on copying – something Dr. Deming warned us about many times. We can not copy Toyota or the Japanese. Organizations and governments require more than copying to get ahead or they will always be behind . . . You can’t catch up copying it requires new and better thinking.

We have our own fundamental thinking problem is the US. Addressing this requires understanding our industrialized, mass-production design of work and how it works against improvement. In service, manufacturing has different problems and perpetuating poor thinking by a fad that succeeds 2% or less is certainly the wrong direction.

When the chips are down . . . the buffalo move on. It’s time to move on to better thinking.

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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Knowledge Over Strategy

May 12, 2011 Tripp Babbitt Leave a comment

Those strategy sessions . . . full of the visionary people of any organization. Sitting in a room concocting up plans, hopes and wishes. But few make touch with reality – of any kind.

How many times must we sit in a meeting full of big egos and assumptions to develop the 5-year plan without knowledge? There are talks of trends, a few anecdotal customer quotes, an industry “expert” and . . . of course, the financial review and budget. The it is lunch, golf and dinner before the “putting the strategy together the next day.

They would have done well to continue to play golf. Because as a strategy is assembled, projects are identified and executive owners can then take action on their assumptions. Taking action on assumptions is the wrong thing to do, it locks in the waste and sub-optimization with a management mandate.

Not that anyone ever goes back and looks at what they developed during these strategy sessions. Strategic plans come in a binder and gather dust on management shelves. If you want to get green, get rid of this waste.

The closest thing organizations are left with are the project plans, targets and the budget information. All the wrong thing to do. Somehow this is what management has become.

But wait, there is the need to report on all this activity with reports. “We will need information technology.” What we really need is knowledge technology. But this requires work, something best avoided by management.

Gaining knowledge is really very easy. Spend some time in the work getting knowledge of the “what and why” of current performance. Then maybe you will discover you don’t need to “strategize.”

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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SPC – There is NO Other Way!

May 11, 2011 Tripp Babbitt Leave a comment

I read an article today in Quality Digest about Dr. Don Wheeler (An Interview with Donald J. Wheeler). I had the pleasure of getting a solid back ground in SPC from Dr. Wheeler and from a local (Indianapolis) statistician named Tim Baer. I won’t pretend to have their knowledge, but through application of statistical theory I have learned that there is no other way to know whether improvement efforts or experimentation are making things better.

W. Edwards Deming challenged us in many ways. He warned us not to copy the Japanese (because we could never catch up). The perpetuation of Dr. Deming’s ideas requires a solid understanding of statistical methods. Rarely, do I walk into a service organization and see the use of control charts (or process behavior charts as Dr. Wheeler references them).

The truth is there is no way to know whether things are getting better without the use of SPC.

That is correct – there is no other way! So this begs the question of why their use is so uncommon amongst those that mine, analyze and use data. If they did they would understand why targets are so damaging. Or why the system governs performance and not the individual. These are things you come to understand when you understand variation through the use of SPC. My Myth Buster series at IQPC explains why – click here.

To me, operating without solid knowledge of SPC is a mistake that is very costly. An organization trying to achieve business improvement must know when things are betting better or falling apart. Sometimes you find out that things are worse when it is too late. This requires an early warning system for a business tsunami that can wipe you out.

Using data in appropriate manner is hard to find these days in service organizations. SPC is the only tool worth learning.

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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The Executive Glass Floor

May 10, 2011 Tripp Babbitt Leave a comment

It’s a little early for football, but I always can remember a game or two where the team leading goes into a prevent defense. The commentators predictably comment that a prevent defense will prevent you from winning.

Business is different than football in many different ways. An important one being that aim of business is not to win, but to make money. This is often lost in the conversation with executives especially ex-athletes carrying over their glory years and yearn for the competition of business. Aggressiveness without knowledge is a dangerous thing.

Yet, when it comes to making profit most management types look to protect their position within the company. You hear words like, “Don’t make waves” or “That is too risky” or “Protect the bottom line.” These are all ways of playing prevent defense in business. Accountants and risk types can point behind trouble at every corner. Sensational headlines each day lead to adding expense to protect profit.

Instead profit is diminished as more and more infrastructure is added for protection of more an executive’s position than their profit. The things they do to protect by watching financials daily and setting targets do nothing but add expense. The real work is buried amongst a meaningless pile of management reports.

The end game is always surprise when executives realize that the management reports have betrayed them. “This isn’t what the reports were saying” . . . exactly the problem. Meeting internal and external SLAs (service level agreements) is never a good way to manage.

Rarely, do I find that service systems report what is happening accurately. Instead, they report “what matters.” And in too many cases this leads to manipulation because “what matters” is what the boss says is important or is rewarded through incentives. Hit those targets and you get a prize.

C’est la vie.

The management paradox is that this form of “prevent defense” prevents you from profits. It is a huge thinking problem for executives. The answer is seeing for yourself the damage, don’t believe me. Hierarchy and not seeing installs a glass floor. “Me, in the work? Don’t you know who I am? I do NOT go there.”

Huge profits await those that are willing to shake the hierarchy they have embraced in favor of a more knowledgeable approach. Seeing is believing and it will save a fortune on your technology spend for data mining and analytics.

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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Tools or Systems Thinker – You Choose

May 9, 2011 Tripp Babbitt 4 Comments

I recently read an article by one of the management fad proponents that even though they used tools they were a systemic thinker. Further review and reading determined they provided no evidence of systemic thinking in the work they had done. Where is the evidence? None existed.

The use of tools offers problems I have written about before. I wrote about it in my recent Quality Digest column – Are You a Sheet or Shelf Thinker? Tools limit thinking and create a barrier to systemic and breakthrough thinking.

Systems thinking (and more specifically, the 95 Method) is about method and innovation. It addresses the management thinking that has to be challenged because of the assumptions that lead service organizations in the wrong direction. The functional separation of work, targets, financials, hierarchy, technology, information are but a small sample of items that need to be challenged.

So, part of systems thinking is about addressing not just the design, but the management of the work. Management thinking drives the design. The management fads claim to do this too, but look for the evidence . . . lots of hat, but no cattle. Pathetic and misleading.

Managers have a choice too, they can pick assumptions or knowledge. Knowledge requires context to all those management reports with meaningless data. One can only get that in the work.

Tool-focused activities support status quo in management. Most don’t know better, but many believe that someday if they see the benefit of tools management will buy-in over time. The benefit never comes in sufficient quantity to convince management and management relegates the improvement fads to lower and middle management or the front-line. A dead-end for sure.

Unless efforts to optimize systems include management . . . it is better not to start. Systems thinking includes everyone and everything, not just the elitist or tool users wreaking havoc on the systems. This is not business improvement, it is more waste and sub-optimization in the system.

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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Monthly Archives: May 2011

Service as a Commodity

Economies of Flow for Service Design

Facts are Stubborn Things

The Problem with Budgets

Home Depot’s Service Lesson

The Truth about Why Lean Programs Fail

Knowledge Over Strategy

SPC – There is NO Other Way!

The Executive Glass Floor

Tools or Systems Thinker – You Choose

The 95 Method