"The power to transform businesses" - Lean in the service sector

Following on from its programme last year about applying Lean to the UK’s National Health Service, the BBC Radio 4 “In Business” programme this week again focused on Lean, this time its applications in the service sector.

The programme started inauspiciously. Lean practitioners would have been disappointed with the erroneous claim that the Toyota Production System “turned much of what Henry Ford had done on its head”. Taiichi Ohno, credited by Toyota themselves as “the man who did the most to structure the Toyota Production System”, himself credits Henry Ford’s book ‘Today and Tomorrow’ as a major influence on his work. Additionally, the programme had at its centre-point an interview with James Womack, co-author of the seminal Lean text ‘The Machine That Changed The World’, and a man who has said: ”Henry Ford was the world’s first systematic Lean thinker”.

However, despite a lack of poka yoke, the programme recovered from this to offer an enthusiastic, if somewhat rudimentary, look at Lean as applied in service organisations.

The programme stated that Lean thinking is spreading to the service industries that comprise such a large part of the total world economy. Mr Womack gave an example of how companies worry about customers switching providers, and yet their focus on cutting costs has resulted in a lack of constructive dialogue between the organisation and its customers.

“The whole idea is to de-skill jobs, to make them utterly simple to drive costs down, down, down,” he said. “But wait a minute, what you give away is that no-one understands the process, no-one understands the customer, no-one can make a decent living. And this is called the march of civilisation.”

The lesson for business is to take customer relations far more seriously, but the ‘established’ view is that it costs too much to do so. The programme focused on a some organisations that are good examples of how this view is not only flawed, but ultimately potentially damaging.

Net Promoter Score: direct feedback, maximum convenience

Measuring customer satisfaction is taken so seriously at GE Money that executive rewards are linked to it. Simon Smith, Commercial Director of GE Money for Europe, the Middle East and Africa, was interviewed by the programme and revealed that their satisfaction surveys are not tied-in to change, growth or volumes, which is the traditional way. Instead, they use Net Promoter Score, the rating system which asks customers simply if they would recommend the organisation, product or service to their friends or colleagues.

The system is about getting direct feedback at maximum convenience to the customer. “It’s linked very much to trust,” said Mr Smith. “If you are recommending a product that you have, it is much more of a significant link to growth opportunities for a business than [simply saying] you are satisfied with the product.”

“Linking this recommendation to your Lean philosophy what you are saying is: ‘I am listening to you and we are acting and doing something about it’, and that’s the fundamental philosophy around what we are doing.”

At GE, this system, as well as being linked with executive rewards, is also married with Lean principles to ensure that they can deliver precisely what the customer wants. Talking of Lean, Mr Smith said: “You can do it in any industry, and anywhere in the organisation. When we started, we did it in the post room. The reason for this was to build up an element of trust and confidence in what you are trying to sell will work.”

Customer focus for customer benefit

The programme also focused on Gem, a provider of multi -channel, multi-lingual contact centre services to global organisations and an excellent example of how customer focus can deliver real benefits to a company.

In recent years, the tendency within organisations that require the services that Gem supplies has been to outsource them to countries such as India, which are perceived as being of greater value because of their reduced cost. This in spite of the disbenefit and dissatisfaction this practice gives to their customers.

In order for Gem to remain competitive, they had to think hard about how they could provide a better service for the organisations they provide the service for, as well as their ultimate customer: the caller.

They did this by implementing Lean principles and focusing on the needs of their principle customers. In tandem with their clients, they have worked to reduce the emphasis on targets, and instead put the customer experience first. In turn, this has enabled them to collect data on the calls they receive, identify patterns and areas for improvement, and communicate these to their clients, thus allowing them to provide better services to their customers.

Interesting statistic

The programme also spoke to a Lean consultant and a senior VP at Amazon, with the emphasis very much on customer focus.

Overall, it was an interesting insight into the effective implementation of Lean thinking in a service environment, although it failed to really get into the vital concept of eliminating waste. Whilst the customer focus aspects are, of course, paramount, there was little lower level information about how the eradication of muda, as well as the implementation of pull systems, kanban, and the other aspects of Lean, can significantly contribute to creating a world-class enterprise. This is a shame as this would -- arguably -- be more attractive to the ordinary manager or executive.

However, if they stayed around for the end of the programme, there was one interesting statistic that would make anyone sit up and take notice. The benefits measured at GE Money that can be linked to Lean for 2007, as attested by Mr Smith, amount to approximately $500 million. That kind of impact to the bottom-line would make anyone pay more attention to their customer.

Click here to download the episode.

Did you listen to the programme? What do you think? Did it miss some of the vital aspects of Lean? Or was it a fair view as an introduction? Post your views on the onesixsigma.com forum