A Lean 3P Process for Designing your Value Proposition

Purposes, Processes and People are my Lean 3Ps when I am considering, designing or creating a value proposition. First of all, the Lean 3P Process can actually be viewed as a Lean Program Management system and is a great way to institute change within a program.

Purpose:

When most of us define a value proposition, we correctly view it from the standpoint of what customer’s pains we are relieving and/or what gains we are delivering to them. Alex Osterwalder does his usual excellent job of defining that approach through The Value Proposition Canvas. It is an extension of his Business Model Canvas. More information can be found on his website http://businessmodelgeneration.com. A video of Alex describing it is contained in a recent blog post, Mapping Customer Pains to your Value Proposition.

As well as I like the tool, I believe it falls short in creating a compelling value proposition. Sure, it delivers on the strategic side, but we have to deliver tactically and socially to create value. It is a 3-legged process of Purpose, Practices and People. It defines the purpose well enough but what do we do with it? How do we implement it? How does the customer want it implemented? How does the customer want it delivered? This is where I found using the Lean 3P Process allowed me to finish the job. It made me create more than a strategic side (purpose) to the equation.

People:

Viewing the people side using the Competing Values Framework that I discussed in the blog post, The Lean Marketing version of Lean 3P, was a way of understanding what drives both our customers and our organization. The values that this framework addresses, Collaboration, Creation, Compete and Control, compete for not only our internal resources but are competing in our customer’s organization. We have a much better chance of executing our value proposition if we understand how we deliver our value proposition and how it is being received. It is the social aspect of value.

A customer in the pre-purchase stage may view our proposition from any of the four competing values; Collaborative, Creative, Competitive or Controlling. That may even change during the purchase and the after-purchase stage. Our position will not necessarily match or mimic the customer’s position. That may not be the strongest position to deliver the value they desire. A customer may want a controlling value proposition from you. There are a set of best practices to work with competing values, which are defined in this PDF created by the Competing Values Company. How you communicate gains or relieve pain may be more important than delivering the best solution.

Even though I mention people, it is really about organizations and even markets when you are considering creating a value proposition. I believe you would see distinct differences in your success rates when they are grouped in this way.

Processes:

I originally started to think that processes should be called practices. However, after some thought, I have changed the wording to processes. I think it is a better fit. A Lean organization is defined by the culture of PDCA, PDCA being a somewhat generic term for Kaizen and continuous improvement. In my thoughts, within the organization, PDCA is broken down into three areas: SDCA, PDCA, EDCA. When considering the Value Stream or fulfilling our promise as stated in the value proposition, we define these terms in this manner:

• SDCA: A tactical team works with a customer needing standard products/services.
• PDCA: A problem solving team works with a customer needing slight alterations or bundle products/services.
• EDCA: Creative team works with a customer who needs new or major changes to products/services

This is an important part of the value proposition. It is how work will be done. This is our evidence that we can deliver on our promise, our value proposition. If you have watched the video you might be wondering. there our four quadrants in the framework and there are only three processes described. Well in the framework they match up like this:

• Create = EDCA
• Compete = SDCA
• Control = PDCA
• Collaborate = CAPD

I often use the CAPD cycle when starting a customer conversation. I describe the process in the blog post, Looking and Listening first is not all that Bad of an Idea. I did not use it as one of the processes because seldom will you see it as part of an actual long-term value proposition. Or we may use it at the beginning and convert to another cycle of PDCA for example. However, as collaboration continues to gain steam within our organization, this may all change and CAPD may join the other three.

PDF Version of the CAPD Tree.

Summary:

This approach is not meant to be cast in stone. Osterwalder’s Value Proposition Canvas could be replaced by the 5Cs of Driving Market Share Program. In fact in some instances, when considering an established brand, it should be. However, my attempt with this exercise is to demonstrate that a strategic value proposition is very limited if it cannot be effectively deployed. Summarizing, the steps to creating an effective value proposition are:

1. Strategic alignment occurs with the Value Proposition Canvas.
2. Tension is created from the Competing Values Framework.
3. The Processes manage the tension. If not the strategy will oscillate and be ineffective.

Using this three-legged approach, my take-off on the Lean 3P Process, creates a superior value proposition and one more likely to succeed in the marketplace.

P. S. This is your first step to creating DEMAND. To Learn more…

Sign up: Lean Sales and Marketing Workshop

Relationship Building thru Technology

Smart Mobs, Peer to Peer Networks, Crowdsourcing and Lean is what Liz Guthridge, the founder of Connect Consulting Group and I talked about in our podcast. When I created the cloud, I saw what was really important to Liz and at the center of her thoughts; people!

At Connect Consulting Group, Liz helps leaders implement high-risk strategic initiatives in their organizations. She has expertise in employee communications, research and change leadership. She also serves as a community expert volunteer for Powernoodle, and has facilitated multiple sessions over the past year.

Enjoy the podcast as we discuss technology as it applies and is used by Liz’s favorite subject, people.

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Lean 3P is PDCA on Steroids

Well said by author Allan R. Coletta of a new book The Lean 3P Advantage: A Practitioner’s Guide to the Production Preparation Process. Development of the 3P process is attributed to Chichiro Nakao, a former Toyota group manager and the founder of Shingijutsu company. The accepted meaning of 3P is Production, Preparation, Process.

Allan is a chemical engineer with an extensive background in manufacturing operations, supply chain and engineering, gained while working in the chemical process and healthcare diagnostics industries. Allan is a practitioner more so than an author, and I believe you will enjoy that perspective in the podcast.

Toyota delivers product designs on schedule 98% of the time (as stated by @flowchainsensei on twitter). Now, I am not sure how I can confirm this statement except that I believe this source to be accurate and even if Bob was 50% wrong, it would mean Toyota still exceeds the majority. However, after interviewing Allan and reading the book, I can understand and believe that statement. This is an excerpt from the book:

Lean 3P is a powerful enabler for invention and innovation because it creates a structure and a process for people to create both independently and collaboratively. However, 3P is not presented as a "one size fits all" means of creating brilliant new products that takes us from "blue sky" to product launch. It might work like that in some instances where a new product is a variation of an established product or in organizations where the same team is inventing, developing, and working together to launch a new product. With additional experience the role of 3P in the full product development will likely expand. For companies new to Lean 3P, the question might be how 3P will integrate into existing product development processes.

A recent blog post, Applying Lean in the Lean 3P Design Process contains a written excerpt from the podcast.

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I talked to Allan for a rather long time and had to shorten the podcast. I chose to cut his acknowledgments of several people that include Andy Johnson, Maria Stopher, Ken Rolfes and two former Business901 podcast guests, Drew Locher and Ron Masticelli. I apologize to any that he mentioned and I failed to here.   

Allan’s Lean experience started while serving as Site Manager for ICI Uniqema’s largest Specialty Chemicals plant in North America and continued to expand is his role as Senior Director of Engineering for Siemens Healthcare Diagnostics. His passion for manufacturing and engaging people in continuous improvement continues to grow through personal application of Lean principles. Allan serves on the Delaware Manufacturing Extension Partnership’s Fiduciary and Advisory Boards, and is a member of the Delaware Business Mentoring Alliance. He is also a member of the American Institute of Chemical Engineers and the Association for Manufacturing Excellence (AME).

Project and Change Management Simplified eBook

In a recent podcast, Project and Change Management Simplified, Bob Lewis president of IT Catalysts discussed his specialty project and change management.  This is a transcription of the podcast.

Since 1996, when he started his “Survival Guide” column in InfoWorld, Bob has been in the forefront of a guerrilla movement in how businesses should design and plan change, and how the IT function should relate to the rest of the enterprise. Bob is the author of several books to include Bare Bones Project Management: What you can’t not do and Bare Bones Change Management, What you shouldn’t not do.

Bob has recently teamed up with David Anderson (David recently appeared on a Business901 podcast, Change is Best when it Evolves) to present a 2-day workshop on Business Change Management. This will include topics specific to Agile and Lean transition initiatives. More information on the workshop can be found at Business Change Management.. Workshop Date: Los Angeles, CA December 3-4, 2012

My tool for running projects? 

Lean Perspective on Construction

I have been a fan of Larry Rubrich of WCM Associates LLC for a long time admiring his work and enjoying his book, Policy Deployment & Lean Implementation Planning: 10 Step Roadmap to Successful Policy Deployment Using Lean as a System. This book specifically may not make you run out and try to implement policy deployment or the Lean term, Hoshin Kanri rather it is more of a “how to” without being to prescriptive.  

Recently, with my recent interest in Lean Construction, Larry’s name surfaced once again. I discovered he has been working in Lean Construction, since 2003 and had recently published a new book, An Introduction to Lean Construction. In addition, he was hosting several workshops on the subject. His workshops consisted of not only one after the book title but another called, Choosing By Advantages (CBA). From the workshop outline:

CBA is a structured decision-making process that starts when a decision must be made and ends when the decision is implemented and the results evaluated. CBA's basic rule of sound decision-making is: decision must be based on the importance of advantages only. CBA can "Lean Out" the entire decision-making process.

Below is a word cloud and the podcast that I had with Larry about Lean Construction. An excerpt from the podcast is available, 2 Steps to a Lean Culture Change.

 

 

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Larry has over 35 years of experience in engineering and manufacturing in the automotive, industrial, and consumer product areas. He has held the positions of product engineering, chief product engineer, product manager, customer service manager, area manufacturing manager, continuous improvement manager, and plant manager with fortune 100 corporations. Larry spent time in Japan studying Japanese management and manufacturing techniques working directly with top-level Japanese consulting group hired by a U.S. company to implement the Toyota Production System (TPS) in its plants.

Jobs to be Done - Explained by Dr. Deming in 1950

John Hunter has been enlisted to write the Deming Blog and discussed this speech in great detail in a recent blog post, Speech by Dr. Deming to Japanese Business Leaders in 1950. The Deming Blog is a newly created effort by the Deming Institute. John is my guest next week on the Business901 podcast.

Clayton Christensen, author of The Innovator’s DNA and The Innovator’s Solution to name just a few of his books, talks about the “Job to be Done.”

Product and customer characteristics are poor indicators of customer behavior, because from the customer’s perspective that is not how markets are structured. Customers’ purchase decisions don’t necessarily conform to those of the “average” customer in their demographic; nor do they confine the search for solutions within a product category. Rather, customers just find themselves needing to get things done.

In a talk Dr. Deming gave at the Mt. Hakone Conference center in 1950, Dr. Deming seems to have touched upon the same concepts.  He used the term “most useful” in lieu of “jobs to be done.” However, it formed much of the same thinking that Christianson has expanded on. The attendees included the top industrial managers, representing an estimated 75% of industrial capital base of Japan at that time. Several quotes from the speech:

Most useful” means the design and product quality must suit the purpose of the good; raw materials, mechanical manufacturing techniques, transport, and products must be the best as we consider them from the viewpoint of the marketplace. If you do not conduct market surveys about what quality or
what design will be in demand, your products will not succeed in being “most useful.

The process of sales is not something that finishes simply with transporting the products to the marketplace, and receiving money. In today’s sales, after selling the product, the businessman must think about whether he has satisfied the customer, and how improvements can be made from then on.

You can read a full transcript of the speech at Statistical & Scientific Thinking. Of course some of the tools, surveys, may date the talk but the lesson that Dr. Deming gives is timeless. I often find most Lean discussions center on supply side thinking. However, as I reach past Lean, past Toyota and the Toyota Production System, I find Dr. Deming’s work very pertinent to the demand side. This speech is just one example and more proof on why Dr. Deming work is well worth visiting. 

I asked John in the podcast, why has Dr. Deming’s ideas continued to flourish. There are several reasons that John gave and below is just one of them:

Another reason why I think Deming has had such a long‑term success is, one of the things that makes it challenging is, Deming's ideas are not prescriptive. He doesn't have a cookbook for, "Do X, Y, and Z, and then you'll get a bonus." It makes it frustrating for people when they're first trying to apply things.

They read some of Deming; they listen to some of Deming, and they don't know what to do next, and that is, I think, a fair criticism. It's a problem that people have when they want to implement Deming. They start to pick up some of these ideas and like them, but they don't know what to do next.

That's a problem initially, but it actually allows for him to stay relevant and important for a long time, because what you have to do is understand the ideas, and you have to apply them in your specific context yourself. That may be a bit more difficult to get started, but it means that you're not hamstrung by some sort of simple‑minded, "You have to do X, Y, Z," and if you don't...

As the world changes, and that sort of cookbook no longer works, well, it no longer works. Deming, it's very difficult for me to see how that happens. However, variation is being generated; it's going to be important. You have to understand variation. When you're looking at human systems and having people, you have to have an understanding of psychology, a respect for people, and make things go together, and manage human systems well.

Deming talks about that, but he's not very specific or prescriptive at all about, "Well, what exactly am I supposed to do?" One of my favorite small little things from Lean is, Deming really talked about understanding Psychology as one of his four pillars. I think respect for people is a much more powerful label on that same idea.

How you actually show respect for people is not very prescriptive in Deming. It does have some things that are fairly prescriptive, like reduce extrinsic motivation, build intrinsic motivation, get rid of things like performance appraisals. Get rid of arbitrary numerical targets. Show people how they are connected.

Deming didn't use the term value stream very much, but the same concept was definitely there. Essentially with Deming, when he talks about joy and work, one of the keys was tying the person to their place in the value stream, so they see that I am providing a valuable service to this end customer at this part of the value stream.

In the great Charlie Chaplin film "Modern Times," that sort of design of the person being a gadget in a big huge machine, cranking out stuff, and all you do is turn a screw all day long, every day, every week, every year; that's not very fulfilling.

If you understand what your role is in this sort of value stream, and how you're helping the end customer get what they want, that does allow people to get meaning from their work.

Now, you still also want them to do more than just turn screws every time. But that idea of connecting you to the value stream is somewhat prescriptive in Deming, but it's so broad that I don't see how that goes out of vogue at any point. I think that's another reason why Deming's ideas have flourished.

Related Information:
Do You Know the Right Job For Your Products?
Will Product Managers embrace Open Innovation?

Thoughts on Healthcare Kaizen

Lean Healthcare has been a central part of many of my podcasts and is a much talked about field these days. A result of not only the cost savings that Lean provides but the ability of Lean to assist in prevention of errors and time-saving. There have been few greater advocates of the application of Lean in healthcare than Mark Graban, author of the popular Lean Blog. Mark and his co-author Joe Swartz of the book Healthcare Kaizen were on the Business901 podcast, Engaging the Front-Line with Kaizen.

As a result of the podcast, I received a complimentary copy of Healthcare Kaizen: Engaging Front-Line Staff in Sustainable Continuous Improvements. I mentioned to Mark that I would post a review and then give it to someone I knew in a Healthcare position. Now, after reading the book, I realize what a stupid commitment I made, I really do not want to pass the book on.

The book contains over 200 illustrations; many of them color, all directly related to healthcare. These illustrations are from practical healthcare-related work demonstrated in facilities such as St Francis Health, Akron Children’s Hospital and many others. The content contains examples after examples demonstrating the use of the Kaizen (continuous improvement) concepts all related to healthcare.

I spend much of my time in Sales and Marketing. In these engagements, a certain amount of trust is developed and fortunately my work is sometimes extended into other customer areas, primarily the service area. Of course, healthcare is very service orientated and the examples and illustrations parallel much of my present work. I found many of them very applicable to other service areas.

When we read a well written book, we feel comfortable that we understand the process. They have broken the information down so that it is easily understood. Very similar to good speakers, we walk away saying; “I knew that.” All that is left is for us to do is implement the process. However, most implementations and applications are not so straightforward, and we end up changing very little.

After reading Healthcare Kaizen, I walk away with the feeling that they have explained how to start a Kaizen implementation. I am thinking, “I know this stuff.” However, the book goes a step beyond. It is more than a how to but rather a guide to make our processes better. The book seems like a companion for a Lean journey versus a reference.

If saying that is not enough, what makes this book a keeper is that it may be the best book on Kaizen that I have ever read. Mark and Joe start out explaining Kaizen at the most basic level. So, you do not need to know anything about Lean or Kaizen. They go on to explain how Kaizen is intended to be used, at the place of work utilizing small incremental change, the secret to the success of Kaizen. The book explains a process such as a visual board, gives examples and then provides a how to. It is a step by step guide for the implementation of Kaizen and can be utilized at any level within the organization.

Other thoughts:

• I reviewed the actual book not the Kindle version. I have no idea, but I cannot imagine a Kindle doing justice to all the illustrations, but someone else has to speak for that.
• The book is a little expensive for someone to purchase that is not in the healthcare field. But I do compliment the publisher, Productivity Press, for allowing that many colored pictures to be used.
• There is so much information that you may be overwhelmed. My instincts were to rip the book apart in sections and chunk the knowledge into a more defined space. I am sure that is just a limitation of my learning capacity.
• The book could be sold by chapter in a Kindle version that would allow it to be utilized for a specific use.
• I would encourage forming an internal meetup group to discuss each chapter on a monthly basis.
• I think it would benefit any Healthcare facility.

The book website offers additional information: http://hckaizen.com From the Book Description: Healthcare Kaizen focuses on the principles and methods of daily continuous improvement, or Kaizen, for healthcare professionals and organizations. Kaizen is a Japanese word that means "change for the better," as popularized by Masaaki Imai in his 1986 book Kaizen: The Key To Japan's Competitive Success and through the books of Norman Bodek, both of whom contributed introductory material for this book.

Joseph E. Swartz has been leading continuous improvement efforts for 18 years, including 7 years in healthcare, and has led more than 200 Lean and Six Sigma improvement projects. He is currently the Director of Business Transformation for Franciscan St. Francis Health in Indianapolis, IN.

Mark Graban is the author of Lean Hospitals and has worked as a consultant and coach to healthcare organizations throughout the world. He serves as a faculty member at the Lean Enterprise Institute and is also the Chief Improvement Officer for KaiNexus, a startup software company that helps healthcare organizations manage continuous improvement efforts.

Custom Magnetic & Dry Erase Comic Strip

Do you need a customizable comic strip that lets you create your own comics using magnetic characters? It’s a great start for a service design project and creating a customer experience. It’s part of a Kickstarter project by Erik Heumiller. There are loads of options on the website from $1 to $300.

The Magnet Comic is a dry-erase comic strip that uses magnetic characters with a variety of different facial expressions to make the comics you want to make. It also lets you make comics a part of your every day life whether at home or work because it's a physical comic you can display and interact with.

Kickstarter is a funding platform for creative projects. Everything from films, games, and music to art, design, and technology. Kickstarter is full of ambitious, innovative, and imaginative projects that are brought to life through the direct support of others

Back this Project!

This project will only be funded if at least $6,500 is pledged by Sunday Dec 16, 3:17pm EST.

P.S. Pledge $10 and get a Comic Character of yourself emailed to you.

Difference between Development and Design–Empathy!

The thought process that I try to embed in Lean Service Design can be summed up in one word: Empathy! It is a major differentiator between the traditional process methodologies of Six Sigma, and I say this tongue–in-cheek, Lean. Many times when you review Design for Six Sigma, Lean Startup, Lean Product Development, Lean Services and Lean Design (the list goes on), seldom when you search (like never) the index of the book will you find the words Empathy.

In Lean, you will find the words Respect for People and it is rigorously applied by most Lean practitioners. However, it is typically applied from an internal viewpoint. I do not want to imply that it does not carry over externally (Customer Experience will mimic the Employee Experience) but seldom do I see it addressed. In healthcare, I believe you will see it addressed more than anywhere else at the moment, but I believe that discipline was built from a compassionate side to begin with. It was not guided by Lean as an enabler of empathy. Developing products/services requires an organization to understand the emotional needs and difficulties of their prospects and customers. Our product/service development should be centered on understanding value in use (Service Dominant Logic).

Most organizations struggle in their attempts as they evaluate seas of data often times masqueraded in a method called called voice of customer. Often, it loses the personality of the customer. The tendency is to view development as product/service centric rather than customer/user centric. The area of Empathy is very evident in Service Design and Design Thinking. A few more thoughts about this. The 'Double Diamond' Design Process Model (From the Design Council in the UK – a complete description of the process can be found here.)

Different designers manage the process of design in different ways. But when we studied the design process in eleven leading companies, we found striking similarities and shared approaches among the designers we talked to. In this section we show one way of mapping the design process, and give more detail on the key activities in each of the process's four stages.

The double diamond diagram was developed through in-house research at the Design Council in 2005 as a simple graphical way of describing the design process.

Divided into four distinct phases, Discover, Define, Develop and Deliver, it maps the divergent and convergent stages of the design process, showing the different modes of thinking that designers use.

What I find intriguing about Design and specifically the double diamond is its similarity with the 4D process of Appreciative Inquiry.

1. Discovery: What gives life?
2. Dream: What might be?
3. Design: What should be?
4. Destiny: What will be?

I think the resemblance is not coincidental by any means. I think is a direct reflection on how the Design process has moved development into the customer’s playground. Shaping positive outcomes is only done by understanding (which comes from empathy) the user of your product or service. No longer, can we consider ourselves the experts. We may have more product knowledge but unless we understand how that can be applied and transferred to the use of the product (Service Dominant Logic) it will serve little purpose for the organization and the customer.

Shifting your organization from an internal Product/Service Development process to a Service Design/Design Thinking process may be assisted with a little Appreciative Inquiry training. Empathy is a more difficult process to acquire. Many will say it is a personality trait and much easier to hire than to change someone that has little. A great starting point is a favorite book of mine on the role of empathy in business: Wired to Care: How Companies Prosper When They Create Widespread Empathy.

You may be interested in the Lean Service Design Trilogy Workshop

Change is Best when it Evolves

I’ve realized that I want to focus my own business a lot more on “How can we help you manage change?” rather than “How can we deliver you a new process solution?” because I often feel the existing process probably isn’t that broken. Understanding how to tweak around with it and introduce change in a sustainable way is much more likely to deliver success. It will have a higher success rate, higher chance of a successful return, rather than pursue the shiny object and see it crash and burn. – David Anderson (excerpt from the podcast below)

David has recently teamed up with Bob Lewis (Bob is a prolific author, his latest book is Bare Bones Project Management) to present a 2-day workshop on Business Change Management. This will include topics specific to Agile and Lean transition initiatives. They examine the source of organizational resistance to change, describe the seven components of an effective business change management plan, and show how to go beyond a “Managed Transition” to achieve both Evolutionary Change and discontinuous, “fork lift” change. More information on the workshop can be found at Business Change Management..

Workshop Dates:

• Washington DC – October 29-30, 2012
• Los Angeles, CA December 3-4, 2012

The word cloud below is from the transcription of the podcast.

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David Anderson is a thought leader in managing effective technology development. He leads a consulting, training and publishing business at  David J, Anderson & Associates. David may be best known for his book, Kanban: Successful Evolutionary Change for Your Technology Business.

Past encounters with David:

• Kanban Evolution with Anderson
• Kanban, could we call this podcast anything else?

Sales Process Engineering is not Lean Sales and Marketing

Joseph Juran observed, "There should be no reason our familiar principles of quality and process engineering would not work in the sales process." In Management of a Sales Force, a sales process is presented as consisting of eight steps. These are:

1. Prospecting/Initial contact
2. Pre-approach planning the sale
3. Approach
4. Need assessment
5. Presentation
6. Meeting objections
7. Gaining commitment
8. Follow-up

This is your typical marketing funnel or a sales process describing an approach to selling a product or service. We may even choose to call it sales process engineering. Along comes a Lean consultant or a Six Sigma Black Belt saying that we can apply Lean or Six Sigma to the sales process. What they are really saying is that they can show you how to engineer the process. If they are somewhat current, they will throw in discussions about agile, iterations, uncertainty and flexibility. But they are still trying to engineer the process. I know this all too well; I have done the same.

I started out creating product/markets or value streams. The next step of the process is to map the customer journey and then start defining the individual reaction or internal processes to it. The rational for having a well thought-out sales process is that you can standardize customer interaction. From a consultant's (internal or external) view , it offers the opportunity to use design and improvement tools from other disciplines such as product development (Agile) and manufacturing (Quality). It is a good learning exercise and helps you understand your process and may even be a starting point to help you understand your customers. However, it is a mistake to create a sales and marketing process around this thinking. As you may know from my previous writings, Kill the Sales and Marketing Funnel, I believe linear planning will increase the risk for a customer to engage in an inappropriate course of action. I encourage you to read that post before continuing.

In today’s world, you may not know or be able to identify the decision makers anymore. Decisions are being made in committee and every one of those committee members are influenced by many others. It is becoming a very collaborative process. There are still people that carry more influence than others though it is not the perceived hierarchy that an organizational chart depicts. Rather, it is through a network of tangible and intangible deliverables, a network of value.

The conversation is at the heart of the Sales and Marketing process. Through the above mapping exercise, you should not be attempting to find a step by step process rather you should be identifying the conversation and interactions and prioritizing the moments of truths that take place. Just as Lean in the 3P process development process has moved away from stage gate reviews to an event, see blog post, Eliminate your Stage Gates in favor of Events, we need to make a similar move in sales and marketing. I prefer not to call it an event rather a conversation as I described in blog post, Sales and Service Planning with PDCA. A conversation of wiling participants who have demonstrated a willingness to address a job that needs to be done. This conversation has several paths one of discovery through CAPD and another through continuous improvement of PDCA. It is not restricted to a funnel that will limit participants and the sharing of knowledge.

You may ask, how does that deliver sales? What is the ROI of the Lean Sales and Marketing? Dave Gray, discusses this type of hierarchy and sales structure in his new book, The Connected Company. He calls this structure a POD. In the book, he mentions a few companies like Amazon and 3M that operate in this manner. He also mentions Semco, a Brazilian conglomerate that has grown from $4 to $200 million or Rational who was acquired by IBM for 2.1 billion and others. Whether you call them Pods or Value Stream Teams it makes little difference. They are built through a clearly defined vision and supporting processes that empower them in the conversation they have with customers.

Customer Retention Assessment

The typical company will focus on growth by emphasizing customer acquisition. However, market share growth is highly dependent on been able to retain customers. In that area, all that is needed is to find the source or the reason why they defect and then slow the rate of that defection. I doubt that you will ever get to a point where you will never lose a customer nor should that even be your goal. But what you should do is it elevate the importance of customer retention to a level of equality to customer acquisition.

Dr. Eric Reidenbach has been a favorite author, mentor and collaborator with me through recent years. We developed the info-program Driving Market Share  where we spent a great deal of time discussing his favorite past time, the subject of value. During that time we created this assessment on Customer Retention. At the bottom of the post is a quick overview of your answers. 

Customer Retention Assessment:

Q1. What percentage of customers do you lose, on average, in a given year?

            ____%    Don’t know ____

Q2. Do you have a program or system for managing customer retention?

            Yes ____    No ____    Don’t know ____

Q3. Do you have a method or system for identifying systemic breakdowns in customer service?

            Yes ____ No ____ Don’t know ____

Q4. Can you measure the dollar cost of a lost customer?

             Yes ____ No ____ Don’t know ____

Q5. Do you do any lost customer analysis?

             Yes ____ No ____ Don’t know ____

Q6. Have your quality initiatives focused on any customer loyalty or retention projects?

              Yes ____ No ____ Don’t know ____

Last week Dr. Reidenbach gave me the honor of posting his latest article which I divided into two blog post:

• Building Value into the New Product Development Process
• Capitalize on the Speed of Value to Insure New Product Success

About Dr. Eric Reidenbach. He is the Director of the Six Sigma Marketing Institute and the author of over 20 books on marketing and market research. A few of them are listed below.

1. Best in Market: The new Imperative for U.S. Manufacturing (Immediate Download)
2. Listening to the Voice of the Market: How to Increase Market Share and Satisfy Current Customers
3. Six Sigma Marketing: From Cutting Costs to Growing Market Share
4. Value-Driven Channel Strategy: Extending the Lean Approach

Assessment Overview:

Churners are those companies that answer “no” or “don’t know” to the questions are companies that tend to be complacent about customer care and customer loyalty. This response pattern suggests that there is no one or no function within the company that is focused on keeping customers. They are companies that are probably losing significant amounts of revenue by ignoring their own customers’ needs.

The costs of customer acquisition runs about 5 times the cost of customer retention and this can have a significant negative impact on profitability.

Retainers are those companies that have provided a “sticky” environment that keeps customers and enjoys the annuity effect of loyal customers. These companies know what their churn rate is (Q1) and have deployed an active program to promote loyal customers.

More advanced retainers will actively seek out information regarding what they are not doing but should be doing. They may undertake a lost customer analysis (Q5) and use this information in their quality programs (Q6) and to improve any systemic weaknesses (Q3). These companies understand that market share is comprised not only of customer acquisition but also customer retention.

More about customer retention during the week.

Lean as your Business Model

Art Byrne has been implementing Lean strategy in various U.S.-based manufacturing and service companies, such as Danaher Corporation, for more than 30 years, including The Wiremold Company, which he ran for 11 years. He now serves as Operating Partner at the private equity firm J. W. Childs Associates L.P.

Art recently wrote the book, The Lean Turnaround: How Business Leaders Use Lean Principles to Create Value and Transform Their Company that is said to be the c-level guide to succeeding with Lean. I believe that is an injustice to the book. I believe that anyone that is serious about implementing Lean in any part of the organization can benefit from this book. It is about Lean as a business process or what fuels the fire of a Lean implementation. Below is an excerpt from the podcast, Lean as your Business Model that will post next week.

Joe:  The one big overall thought I had from the book, is that you practically view Lean from just about an appreciative inquiry point of view, what you do well, what are the value adding activities? That's like heresy sometimes, what many consider Lean thinking. I think the first thing when someone thinks about Lean, they think about waste reduction. But, you talk about value adding.

Art:  That's correct. There's a simple definition of, what is a business in the first place, not just a manufacturing business, but any business? It's really a very simplistic thing. It's a collection of people, and a bunch of processes all working to try and deliver value to customers. That's true for any business. It doesn't have to be just manufacturing. Unfortunately, the traditional approach that we've evolved to when we run these businesses, we started out with strategy, and more often than not the strategy is to create shareholder value, which I think starts out by having it all backwards because shareholder value, to me, is a result, not a strategy. It's a result of what you do and the value that you deliver to customers over long periods of time is what's going to improve your shareholder value.

You can't just say, "I'm going to do shareholder value." That's backwards. The other thing that occurs in almost all traditional approaches to a business is we take the value adding part of the business as a given. For example, if you're running a company and you have a six-week lead time, and you've always had a six-week lead time, then that's taken as a given, "OK we've got a six-week lead time. How do we do our strategy around that?"

What we try and do instead is we try and get our customers to conform to what we do, to the fact that we have a sixmonth lead time. Then, of course, we focus very, very heavily on making the month. The traditional management approach is focus on the numbers, and make the month, make the quarter, that kind of thing.

Unfortunately, when you're focused on make the month; you're focusing on something that already happened. You can't do anything about that anymore, it already occurred. That happened last month.
In fact, for most companies, by the time they get the results of last month, they're three weeks into this month. Effectively, we're always trying to drive the car through the rear view mirror when you look at it that way. The reality, however, is the opposite of that.

The value is created by a couple of things, one, by improving your own value adding activities. Two, by delivering more value to your customer than your competitors can. Three, by conforming what you do to your customers to satisfy them and make you stand out verses your competition. It's really this opposite...value is created by the opposite of the traditional approach, if you will.

I always like to use the example of a simple thing that productivity equals wealth. Productively, this is true for countries, for companies, for anything. Productivity always equals wealth. If you think of the industrial revolution in England, if you think about why the United States has become so powerful, it's all really because of productivity.

A Lean strategy allows you to get big improvements in your value adding activities, which is basically productivity. It's a way to get productivity by focusing on your value adding activities. As you get these, this creates the opportunity for you to grow and to gain to gain market share, which is particularly important in times like this when the economy is really flat and slow and people are struggling to get any kind of sales growth.

The Lean approach gives you the opportunity to do that by focusing on your value adding. I look at Lean really as the greatest wealth creator that was ever invented. But most people just look at it as a bunch of tools, as I said before. It's a whole bunch of tools in a tool kit.

We can roll then out when we want to use them. If we don't feel like using them...if you look at most manufacturing companies, they say they're going to do Lean, and most of them will start where they're trying to do Kanban, just because they can understand Kanban a little bit better than some of the other stuff. They won't do setup reduction.

They won't do some of the other fundamental things. They'll try and do Kanban, without doing all the other things first, you don't get much cane out of doing Kanban. But, that's the approach that a lot of people take.

I think you really have to understand Lean as strategic to really understand what's possible here. I can give you a really simple example of that, which is, if I just gave you an example that said, we got Company A and Company B; they buy the same equipment from the same manufacturer, so they run at the same speed. Everything is equal. They don't have anything different...as Company B can change the equipment over in one minute, and Company A takes an hour.

If each of them can only afford an hour a day to change that equipment over, then if I asked you who has the lowest cost, and who has the best customer service, A or B, it becomes pretty clear to most people that the guy with the one minute setup is going to have lower cost. He's going to have tremendously better customer service because of his ability to respond quickly.

He decides to leverage that by offering a two-day lead time, when Company A and the rest of the industry has a sixweek lead time. He's going to start to gain market share. Company A's first reaction is probably going to be to build more inventory so that he can offer a short lead time. That's just going to drive his cost up. Or, if that doesn't work, he's going to start to cut the price which also hurts his cost structure and his profitability.

Something that most people would look at clearly as a manufacturing thing, setup reduction, turns out that it's going to give me lower cost and better customer service, two very strategic things. That might give you a little insight into why, Lean at its core, is a very, very strategic thing. That's part of the point that we're trying to make with the book here is that applying the Lean tools and doing this...there's some tremendous results that you can get from this.

How a Connected Company Works

Dave Gray of The Dachis Group and author of a recent book,The Connected Company works with the world's leading companies to develop and execute winning strategies. His previous book, Gamestorming, sold more than 50,000 copies and has been translated into 16 languages.

This video is an hour long but discusses much of the content in the book. He makes a case for why services are important and how they need to be created and managed in the world today. He also makes the correlation on why manufacturing is no longer the caveat that many of us think it is. An hour worth spending.

His discussion on The Law of Requisite Variety is part of my discussion in next weeks blog. The law basically states that any control system must be capable of variety that’s greater than or equal to the variety of the system to be controlled.  From the book;

In other words, if there is variety in the environment, you need enough variety in your system to absorb it effectively. Imagine you are throwing balls at a juggler and the juggler is trying to keep them all in the air. No matter how skilled the juggler, there will always be a point at which there are too many possible states for the juggler's mind and hands to maintain control. At some point, you will either need to reduce the number of balls, or you will need more jugglers.

He goes on to say:

Customers have a tendency to resist standardization. The more you try to standardize their service requests, the more you will anger them. Not a good recipe for customer satisfaction or long-term business growth.

Listen to Dave’s spin on it and next week you will hear mine.

Introduction to Lean 3P Design Process

Allan R. Coletta, author of a new book The Lean 3P Advantage: A Practitioner’s Guide to the Production Preparation Process was a guest on the Business901 Podcast, Lean 3P is PDCA on Steroids. Allan is a chemical engineer with an extensive background in manufacturing operations, supply chain and engineering, gained while working in the chemical process and healthcare diagnostics industries.

This is a transcription of the podcast.

Allan’s Lean experience started while serving as Site Manager for ICI Uniqema’s largest Specialty Chemicals plant in North America and continued to expand is his role as Senior Director of Engineering for Siemens Healthcare Diagnostics. His passion for manufacturing and engaging people in continuous improvement continues to grow through personal application of Lean principles. Allan serves on the Delaware Manufacturing Extension Partnership’s Fiduciary and Advisory Boards, and is a member of the Delaware Business Mentoring Alliance. He is also a member of the American Institute of Chemical Engineers and the Association for Manufacturing Excellence (AME).

Changing the Bottom Line with Operational Excellence

They may be mouthing those words and saying, “We want culture change,” but truly what they want is a return on their investment and a change on the bottom line. We can get you there, but we can only get you there after you change the culture that undergirds your improvement system. – David Adams

My guest this week is David E. Adams, executive director of the Kennametal Center for Operational Excellence of the Alex G. McKenna School of Business, Economics, and Government at Saint Vincent College. KCOE delivers hands-on coaching and educational resources in operational excellence. KCOE produces sustainable results through a proven balance of lean tools, employee engagement, continuous improvement, and world-class coaching.

Operational Excellence is the contemporary, cultural adaptation of the Toyota way and the Toyota production system as learned and experienced by Mr. Rodger Lewis and currently implemented by KCOE as The KCOE System.

A written excerpt from the podcast can be viewed at, We say Culture Change, What we want is ROI.

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