Lean Customer Service

There’s an often-cited Harvard Business Review statistic that goes something like “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.
For review, Lean can be boiled down to 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 is a large body of well-developed systems and methods for achieving #3 (Just In Time, cellular manufacturing, etc.) and the entire focus of kaizen is on improving performance by doing #2, there is surprisingly little in the Lean body of knowledge on #1, defining what customers value.
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 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.
From a product design standpoint Quality Function Deployment does a good job with Voice of Customer and other tools to narrow down the design features customers want. Six Sigma tools can be applied to statistically identify the customers’ spoken and unspoken needs. Both of these tend to focus on analysis of data rather than listening to how happy or unhappy the customers are about the job you are doing right now.
The rule of thumb 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 a “customer service at the source” as well as “quality at the source”.
This begins with face to face interviews with clients, followed by defined customer satisfaction criteria, and frequent satisfaction checks throughout the process. Encourage customers to tell you sooner when they are not satisfied. Encourage people to make it right with the customer sooner. This will save time and money, and keep customers happy.

6 Comments

  1. John cass

    July 26, 2004 - 7:56 pm

    Hi Jon,
    Very interesting post, it makes a lot of sense to me. Keeping your existing customers is always a lot easier than finding a new customer. Lots of lower costs in doing business with an existing customer. I think many customers are leery of changing vendors for the same reason. They understand it will cost a lot in terms of time and money to get a new vendor up to speed on them.

  2. Luckey

    August 5, 2004 - 5:27 am

    What sort of metrics do Gemba use for customer retention? Do some exist? Retained customers that is!

  3. Steve Mason

    October 7, 2004 - 5:07 am

    Do you have any examples in the public sector, say local government, were the local authority needs (or should) to know how residents think it is doing or perhaps what the council should be doing.

  4. Jon Miller

    October 7, 2004 - 8:02 am

    Steve,
    Thanks for your question.
    Just a few days ago we visited the City Hall at Toyota City in Japan as part of our Japan Kaikaku Experience trip. They have had an active suggestions system since 1972 as well as QC Circle type small group kaizen activity. Through these kaizen activities, this government office with just over 2,000 employees serving a population of 360,000 are able to reduce more than $1 million of cost per year.
    Another of their goal is to improve customer service to the citizens. One thing they do to this end is to survey the citizens who come to City Hall and interact with city employees. They had several examples of customer comments from the survey posted where the issue of waiting time for citizens at the City Hall had been addressed, or the complexity or vagueness of certain forms had been corrected.
    I hope this helps.
    Jon

  5. VENUGOPAL

    March 12, 2006 - 3:27 am

    Jon,
    I was wondering about what kind of performance metrics to use for customer service department. Do you know any case studies of Lean in CUstomer Service?
    Regards,
    VENU

  6. Jon Miller

    March 13, 2006 - 8:34 pm

    Hello Venu,
    I’m not aware of any published case studies of customer service departments and Lean. The metrics we typically use are QCDSM – quality, cost, delivery, safety and morale.
    What exactly you measure with each one of these depends on your business and what customers value from you. In some cases D for Delivery may be response time to a question or a problem. C for Cost is typically labor productivity and also any expense-related costs.
    In the case of Q for Quality it may be whether the customer was given full and complete information to solve their problem or fulfill their request, every time. As an example of S for safety, one company made efforts to reduce carpal-tunnel syndrome and repetitive stress injuries in the office.
    M for Morale can be measured in various ways, number of improvement suggestions, employee turnover and results of surveys being examples.
    Like all metrics, they should be practical and meaningful to the business and fair to those working in the processes being measured.
    Regards,
    Jon