Having a structured approach for realising there's a problem, to then quantifying it (to understand severity), contextualising it (to understand impact) and ultimately setting a measurable KPI target to resolve it can sometimes be tricky. KStar Associates work with clients of all sizes to help them develop a culture of continuous improvement & this article (as part of a 2 part series) will cover some of the approaches available through the voice of the customer to try in your own organisation.
Let's start with the problem. Most company directors have a 'gut feel' on what their internal painpoints are, even if they don't have the data to immediately quantify them. It could be that fuel costs are too high for a haulage company, or that too many customer deliveries are late. Where the is already an area to look into, the next step is to then obtain data - this can be from a number of sources:
- existing systems (if operational data is not recorded, you should consider enabling this)
- customers (e.g. survey results, or setting up a pilot to gauge feedback when deliveries are made or orders are placed)
- time & motion study (i.e. setup a process resource to measure timings on key operational activities)
The benefit of having existing systems to draw data from is that you typically have a broad range of datapoints that can be looked at, data capture is automated so usually accurate, and you have the benefit of historic trending. In the absence of existing systems, a company can always capture data from existing customers in the form of surveys or asking them for feedback directly as well as performing an internal time & motion study on key operational processes.
Data allows the problem statement to be quantified, for example: "fuel costs account for 45% of our cost base, up from 30% two years ago" or "12% of deliveries in December were late versus our service promise to customers of 99% on-time delivery."
The cost of poor quality
Managers & employees may think that late deliveries or increased reject rates or even a slight drop in operational efficiency don't have a direct cost because orders are still flowing in, but the reality is everything has a cost associated to it. As part of building a business case linked to the problem statement, the cost in monetary terms should be applied. Using our two examples again, this could means "fuel costs accounts for 45% of our cost base, up from 30% two years ago, equivalent to £250,000" or "12% of deliveries in December we late versus our service promise to customers of 99% on-time delivery, equivalent to £75,000 in refunded delivery fees and £120,000 in 10% off next order vouchers for a total cost of £195,000"
Once you have a clear problem statement, backed by facts and the cost is quantified, it makes building a clear value-led business case much more straight forward. Our recent article on NPV provides a primer on how to improve capital allocation decisions for investment within a company; as you build up a case, the next step is to understand the customer impact of not taking any action to rectify the problem.
Customer Voice (aka Voice of the Customer)
One of the most important considerations is the impact on the customer - both in terms of not taking any action, but also how to ensure the proposed solution to a problem doesn't create new issues for the customer. There are a number of methodologies out there such as House of Quality and Kano Analysis that help capture the voice of the customer, but we personally feel they're either overly complex for the point they serve or just too simplistic. We use our own proprietary methodology which captures:
- Who the customer is (in terms of value: 'high value' 'medium value' 'low value' customer)
- How many complaints or enquiries on a particular issue have been received
- Whether the problem being solved (or proposed solution) would be deemed: 'essential', 'nice to have', 'great!'
- Effort required to implement fix ('low', 'med', 'high')
Points 3 above is really the only one where feedback from the customer needs have directly been captured- this can either be retrospective or by calling up a sample of customers to get their thoughts. Points 1 and 2 are usually available from existing customer sales and complaints records, while point 4 is an internal category that can be assigned to each feedback point. By linking the customer voice back to the customer, it's possible to prioritise capital outlay on addressing painpoints as well as trace back the likely impact of providing a fix will be to customer satisfaction. Essential fixes are typically priority 1, while 'nice to have' items can be gauged against the number of requests received and also competitor benchmarking.
Brining it all together
Bringing it all together, you should now have a number of problem statements, quantified by data & facts, understand the cost of each from a business case perspective and impact to customers. We're almost there, you can see how they all interlink here:
The final part of problem definition is defining the current process and identifying the break points, getting a plan to address specific issues linked back to your original problem statement and ultimately getting stakeholder approval. In the next article (part 2 of this series) we will cover these topics to help you become a more customer centric organisation.
If you have questions on this piece or wish to discuss how it could work within your organisation, please do not hesitate to reach out and contact us for a free no-obligation consultation. Similarly, feel free to share this article & link back to our site using the buttons below. We’re always happy to help.
Latest posts by KStar Associates (see all)
- 3 Guerilla Marketing Tips for the Small Business - May 4, 2014
- A Bad Economy Encourages Thrift: Emergence of Small Businesses Opting for Value Based Deals - April 5, 2014
- New post on process transformation & data analytics - March 26, 2014