By Jens Refflinghaus, Kepner-Tregoe
Operational Excellence isn’t just about profitability and making money for the company. At the end of the day, the reason your company exists is to create the products and services that customers need and value at a price they are willing to pay. Yes, profitability is important – it is what encourages you to stay in business, but profits can only be made if you first make the sale. Here are 5 things you can do to make your OE efforts more customer centric and increase the opportunities to make profits.
- Focus on the things that increase the value of products and services. There is a difference between ‘change’ and ‘improvement’ – its all about impact. As you evaluate options for where to apply your limited resources, look for the opportunities to add meaningful and lasting value to the products and services that your customers consume. That value may come in the form of features, timeliness of production/delivery, quality/consistency of the offerings or price improvements – the key is to look at how the change will impact the customer.
- Consider ‘real’ customer needs, not just what they ask for. Competitive advantage comes from anticipating the needs that customers will have and making the products and services to meet those needs available at the time the need is realized. Most customers aren’t able to articulate what their future needs are going to be (because they don’t know) – they can only articulate what they want to purchase today. Creating or changing products and services takes time, so it is important to frame the customer’s stated wants in the context of the environment and project how changes in the environment will impact their needs over time.
- Understand you are in a competition and customers have choices. With very few exceptions, in a free-market economy, customers have choices on what products and services to consume. This is important because not only are you trying to meet your customer’s needs, you need to do it in a way that out performs your competitors (better, cheaper, faster, more consistently, etc). It is the customer who decides the winner of this competition (through their purchase behavior), so the more in-tune you can be to what customers’ value, the more likely you are to earn their business.
- Identify and eliminate non-value add features and activities from your operations and offerings. Most products and services on the market contain more features than customers really want. In other words, companies are over-delivering. This is wasteful. By understanding what features of your products and services that customers want to consume, you can trim out the extra features (and the operations activities that produce them) – saving you money and still giving the customer what they value.
- Remember the target is moving. Meeting customer needs is a moving target and to hit it, you need to know how fast the target is moving so you can aim for where it is going to be (at the time of the sale transaction). In your operational excellence initiatives, you have the opportunity to either increase your accuracy of prediction (to be able to aim farther in the future) or increase your agility (to respond to changes more quickly). Both approaches can be effective, but you need to be clear on which you are trying to achieve.
By focusing on the customer and understanding what they value, you will be able to identify operational excellence initiatives that help your company become not only more profitable, but more competitive. For over 60 years, the experts at Kepner-Tregoe have been helping companies achieve their operational excellence ambitions by taking tried-and-true problem solving and decision-making methods and applying them to the unique industry and customer dynamics that companies face. To learn how KT can help your company, visit www.kepner-tregoe.com