I was recently passed a link to a Malcolm Gladwell TED talk by a colleague and whilst watching it I thought…
“Nice! This is a simple tie-in to the incredibly important concept of variety in customer demand.”
So here’s the link to the very watchable talk (18 mins): Choice, happiness and spaghetti
Here’s the key points from the talk:
- that Howard Moskowitz (a psychophysicist) had his ‘aha moment’ that “they had been looking for the perfect pickle…but they should have been looking for the perfect pickles“;
- the false assumption that the way to find out about what people want is to ask them….leading to years of fruitless and misleading focus groups. The truth is that:
- people commonly don’t actually know, or cannot (and even will not) express, what they want; and
- they will be constrained by what they currently know. “No customer asked for an automobile. We have horses: what could be better.” (Deming)
- the importance of horizontal rather than hierarchical thinking about customer demand: we thought that customer demand was hierarchical (from cheap up to expensive products or services). Instead, there are only different kinds of products and services that suit different kinds of people;
- that, instead of looking for one way to treat all of us, we now understand the importance of variability;
- when we pursue universal truths [one standardised product/ service/ way of doing things], we aren’t just making an error, we are actually doing our customers a massive disservice;
- We need to embrace the diversity of human beings
Hang on a minute….
So, I started off this post by saying that service is different to manufacturing but Gladwell uses lots of examples of physical products in his TED talk to make his point about the importance of customer variety (cola, pickle, spaghetti sauce, coffee,)…“make your mind up Steve!”
Well, this is a nice segue to explain about two types of variation, and how incredibly important this understanding should be to a service organisation (or the service part of any value stream).
These two types of variety are:
- Customer-introduced (i.e. within their demand); and
- Internally created within the process (regarding flow)
To go back to Gladwell’s spaghetti sauce: Different consumers like different sauces (this is variety in demand) but, once they have determined which variety of sauce they like, they then expect each jar they buy to be the same week in, week out (i.e. minimal variation in the process that creates that sauce).
So, whilst we definitely want to reduce and remove variation in the quality of the process, we should not remove the ability of the process to provide a suitably varied experience and outcome. Rather, it is the opposite – we should be trying to cater for this variety.
In fact, variety in service is MUCH bigger than Gladwell’s product examples:
One of my earlier posts set out five categories of variety in customer demand, as identified by Professor Frances Frei (see The Spice of Life).
Now, whilst it might be useful to categorise service variation (purely to help you ‘see’), the bigger point is that the customer sets the nominal value – the specific value of a service to them.
“The customer comes in customer shaped“
…there is virtually infinite variety in people….and that variety can change for a given person depending on, say, time of day/ external influences/ mood….
Standardisation is NOT the answer…in fact, it is often the problem:
There are legions of service organisations that have hired manufacturing improvement experts (or people who have read books about them) to ‘standardise, specialise, centralise and automate’ because they say “this is the solution”.
Examples at attempts to standardise the customer include:
- using IVRs to standardise customers into categories (“press 1, then press 3…”);
- using call scripts to standardise the content of customer conversations;
- using average handling times to standardise the length of a conversation;
- using ‘box ticking’ forms to standardise customer information collection;
- using ‘black and white’ rules above common sense, when dealing with a customer’s needs;
- forcing customers down one path (e.g. you can only pay by direct debit, you can only interact online, you can only use these suppliers, …….and on and on).
Interestingly, if you read the list above with your ‘I am a customer’ hat on, you will likely recall many instances where you have tried interacting with a service organisation and one or many of the above attempts at standardising you and your demand has seriously frustrated you!
This leads to much failure demand, waste (and cost) but with little value delivered (as written about in an earlier post).
Clarification: this isn’t to say that technology cannot assist or that there is no place for any standards. It’s making the point that the starting point should be that:
“….in service organisations, the problem is how to design the system to absorb variety” [and not frustrate it]. (Seddon)
Our starting point always seems to be ‘efficiency’ and a focus on activity cost. Perverse as it may seem, a focus on activity cost often has the unintended consequence of increasing total cost (though this is not visible to a silo’d organisation and is nigh on impossible for them to measure).
If we standardise, say, a site visit (the activity) such that it can’t absorb the variety in the customer’s demand…then don’t be surprised that:
- there is failure demand from the customer when they complain and/or disagree with the outcome of the visit;
- there is much ‘expert’ time spent reviewing this complaint;
- there are yet more site visits required to resolve the problems;
- there is lots more paperwork/ computer inputting/ workflow management required;
- there is much confusion created by all this extra work (who did what when, who authorised what change from the standard, who is explaining all this jumble to the customer?); and
- trust has been lost with the customer who now questions everything we do
The most important point to note is that “cost is in flow, not in activity”
So why the title of this post?
Well, the above is quite different thinking to where ‘command and control’ service organisations have been going. A revolution if you will.
Put simply, if we understand the variety in our customer demand and try to design our system to absorb (rather than frustrate) it we will go a long way towards our customer purpose…with the likely side effect of doing so for less cost.
“Managing value [for the customer] drives out cost….Focussing on cost paradoxically adds cost and harms value.” (Seddon)