Lean Customer Service

According to an often-cited statistic from Harvard Business Review:

“Developing a new client relationship costs between six to eight times more than maintaining an existing relationship”.

Spending six times more on customer retention does not sound Lean.

The Three Rules of Lean

To summarize, Lean can be distilled into three rules:

1.  The customer defines value
2.  Improvement is focused on removing waste (what customers do not value)
3.  Performing value-added work in a rapid flow maximizes profit.

While there are established methods and systems for achieving the third rule ( Just In Time and cellular manufacturing), and the entire kaizen approach is centered on improving performance by addressing the second rule, surprisingly little emphasis has been placed on the first rule: defining what customers truly value.

The Importance of Defining Customer Value in Lean Transformations and its Impact on Waste Reduction

Take for example the “Lean Pathway” that the Lean Enterprise Institute uses to describe the steps in a Lean Transformation. It states “Specify Value” as step one, yet contains no tools, strategies, or methods on how to do this. At the beginning of Value Stream Mapping, it is necessary to define what the customer values. While it is fairly simple to do this for a manufacturing process, it is rarely done well at the enterprise level, particularly for service companies.

To remove any doubt that customer service is an important part of Lean, let’s look at how poor customer service creates waste. Doing a poor job with a client relationship requires putting in the effort to repair damage (correction, defects). Having to do more sales & marketing activity to keep the pipeline full also stretches valuable resources (overproduction). Doing things we think will keeps the customer happy but may not is also a waste (processing waste). And finally, rapid growth leads to managing more customers or more projects (inventory), at a lower quality level resulting in customer turnover.

The rule of thumb is that letting a defect pass undetected downstream and having to correct it later costs 10 times as much as correcting the problem at the source. Perhaps the “six to eight” times quoted in the Harvard Business Review is conservative. We need “customer service at the source” as well as “quality at the source“.

Jon Miller

Jon has dedicated his 25+ year career to the field of kaizen, continuous improvement, and lean management. Jon spent the first eighteen years of his life in Japan, then graduated from McGill University with a bachelor’s in linguistics.