In competitive business landscapes, organizations engage business process improvement consultants to help increase business performance. While it seems like our efforts are geared towards reducing waste and streamlining processes, we are always thinking about customers.
During the starting phase of our engagements, we begin by interviewing stakeholders from different functional areas. We constantly ask why things are done the way they are and why the functional area is set up a certain way. This may seem like an odd experience for stakeholders, which is why I wanted to write this post: I am hoping this explains some of the method to our madness.
Our primary goal in process improvement is to increase the value a business delivers to its customers. The way we define value is usually very different than how a business would define it before they go through a business process improvement project.
It is said value is in the eye of the beholder, and the beholder should always be the customer.
To be successful, we need to immerse ourselves into the mindset of the customer. And to do that, we need to think about how customers determine value for a product or service.
In Lean, there are five Value Principles that we abide by:
- Value is not just money
Whenever an organization makes a sale, it is not just dollars and cents that exchange hands for a product or service. Money is just one element of the exchange. The customer also exchanges other things it values in the transaction (e.g. time and energy). If you choose to drive to the famous pizza place across town and wait outside in less than ideal weather conditions until your table is ready, it shows that you value your meal much more than the cost of the pizza.
- Your customer does not place value based on how efficient your processes are
When deciding on which chocolate bar to buy, would you pay a different price for a product based on how efficiently it was made? Probably not, instead you would most likely make your choice based on brand name or your personal craving. If you were purchasing a cup of coffee and the barista made it incorrectly, you would expect for the barista to make the coffee again free of charge.
- Value is subjective
Going back to the chocolate bar example, its value is based on context. Different customers would be willing to pay different amounts for a chocolate bar. If you are at the theatre purchasing a chocolate bar for your date, you would likely pay whatever the cashier asked for (especially a first date). The same applies when a business has run out of a key part needed for production and their lines must be shut down until the part is replenished.
- Customers don’t view value individually
In an ideal world, we would be able to purchase everything we want without making a dent on our bank account. In the real world, we must limit our consumption based on our abilities. Therefore, we make our selections based on what we believe gives us optimal value. Every item or service we choose to purchase will impact our next purchase, and it is the value of the basket of goods we are always looking to maximize.
- Value is tied to emotion
We are all human, and as humans we all exhibit emotions to some extent (some of us maybe more so than others). These emotions play a large role into the value placed on products and services. Let’s explore this using a company we should all know, Apple. Apple is known to command one of the most loyal customer-bases in the world. What this equates to is that when it is launching a new product, its customers will line up (sometimes for days) to get their hands on the newest device being rolled out. Once the stores sell out, these devices end up on online auctions fetching much more than retail prices. Because of emotional attachment, people will gladly pay more and endure hardships to have the newest Apple product. However, try to get a die-hard Android user to switch to the brand-new iPhone at a discounted price and they will not bite. Emotions drive our behaviours and make customer patterns harder to predict.
If you would like to have a more in depth discussion on how Lean principles would help your business, please feel free to reach out to my firm or myself directly. We would be happy to assist you in the redesign of your processes, products and services to maximize the value your company offers its clients.
In the end, it is value that pushes a person to choose one product over another and it is the customer that can help elevate your company to success!