1. Service leaders follow the money

    December 23, 2014 by BPIR.com Limited

    Originally posted on Service quality institute by John Tschohl

    Service Leaders consistently have more revenue, make more money, plus have a stronger brand and market share. They dominate the market and crush their competition.  In this issue I will share my ideas on Apple, Metro Bank London and my investment of $1000 each in 9 service leaders in May 2003.

    Financially How do Service Leaders Do?

    (Turning $9,000 into $29,000)

    Everyone says we should focus on customer service but what is the financial impact on a firm that drives its business around customer service?

    In May of 2003 I wanted to track monthly an investment in 9 service leaders. I invested $1,000 in each of them. During the last 11 years I have shared results from this investment with our readers and clients.

    The values below are as of November 8, 2014.

    table

    Leaders Lead

    As I have said before, a firm that can build a brand around the customer experience will increase its value by over 25%. The leaders at the top continue to prove the point. It is very difficult for most firms to keep their focus on a service strategy but not these guys.  They are unrelenting in their focus on customer service.  It continues to baffle me why other companies do not get it.

    Results over 11 years

    TD Bank – Vernon Hill sold Commerce Bank in 2007 to TD Bank. Had he still been running Commerce Bank it would have out performed Amazon.  Commerce Bank for 4 years always out performed the other firms. Then it was sold and customer service is no longer king.

    Dell– was one of the nine I selected. They lost their focus on customer service when Michael Dell retired in 2004 and put a financial guy, Kevin Rollins in charge. Dell returned in 2007 to rescue the company. Last year Dell went private and I got $460 for my $1000. It took 10 years for me to lose 54% of my money. Once Dell lost its focus and brand on service the value never recovered.

    Southwest Airlines -For many years the airline stock did poorly. Most of this growth is in the last 12 months. They have never lost their focus on customer service.

    Walmart – Sam Walton built a business around customer service and price. Starting with CEO Lee Scott in 2000 they focused on price and lost interest in customer service. They have record increases in sales since 2003. The market place places a much higher value on service leaders. Based on sales and profits Walmart stock should be triple what it is, I will repeat — The market place places a much higher value on service leaders. Walmart is no longer a service leader. Better than K-Mart but not much.

    General Electric – Jeff Immlet, the CEO, has done a remarkable job of increasing his pay. He gets paid over $19 million a year ($7,380,000 as a bonus) In the US with executive pay there is often no relationship to results. GE results are average. GE, under Jack Welch was the best managed company in the world. GE has lost its customer service focus. One of its credit card divisions, Care Credit, has lousy customer service.

    JetBlue -The company was built around great service. With the February 17, 2007 winter Valentine’s Day snowstorm where the passengers were kept on the plane for 13 hours they have STILL NOT recovered. The problem was NO service recovery. It was too little and too late.

    Financial impact

    The facts continue to prove the point…ONCE you lose your customer service brand it is difficult to keep the value of the company.


  2. Lean design – Learning from Apple

    February 26, 2014 by BPIR.com Limited

    Lean is optimising a process to preserve value with less work. Lean manufacturing is a management philosophy derived mostly from the Toyota Production System (TPS).
    Lean aims to eliminate waste in the entire value stream, by creating processes that need less human effort, less space, and less time to make products and services at lower cost, therefore Lean simply means creating more value for customers with fewer resources.

    However, how does this relate to Steve Jobs and iPod in particular or all Apple’s iDevices in general?

    Steve Jobs used Lean in another way, instead of thinking of lean as a way of minimising waste in the production process he looked at how to eliminate waste in the way the customer interacts with the iPod.
    For example, the volume up button could have different functions such as selecting a menu choice or taking a photo. This approach enabled Apple to produce mobile phones with just five buttons.

    Apple’s (or perhaps Steve Jobs) innovation is by focusing on customers and how to offer them products without the un-necessary extras from design stage until displayed in an outlet.


    I have an instinctive aversion to hero worship. There is a fine line between valuing the lessons demonstrated by great leaders and slipping into a blind devotion that masks the inevitable flaws to be found in every human personality. Steve Jobs had more than his share of flaws and he possessed more than his share of genius. Reading Walter Isaacson’s recent and excellent biography of Jobs I am struck by the intuitive sense of lean, of flow, of simplicity, that he demanded from both the aesthetics and the technical workings of every product. You would be hard pressed to find an executive with a better sense of the interaction between the social and the technical.

    The Lean Mind

    When we think of lean our mind first goes to the workings of the Toyota factory. However, the principles of eliminating waste and achieving interruption free flow may be found at an even more profound level in the design of Apple’s breakthrough products and the intuition of Steve Jobs. Only nine percent of Americans today work in manufacturing and we might do well to turn our attention to the application of lean principles to less obvious endeavors such as product design and the use of technology.

    From the design of the first Mac to the design of the iPad, Steve obsessed on their design. He understood what we wanted before we wanted it and that was his genius. We didn’t know we wanted GUI’s, an iPod or iPad, and even less did we think we would be attracted to a product by the elegance and simplicity of its packaging. He imagined the customer experience before we had experienced it. This is intuition, a zen appreciation for the movement of the hand and eye and the imperative to eliminate distractions to allow the mind of the user to flow from the first thought to the engagement in the utility of the device.

    On the design of the iPad:

    “As usual Jobs pushed for the purest simplicity. That required determining what was the core essence of the device. The answer: the display screen. So the guiding principle was that everything they did had to defer to the screen. ‘How do we get out of the way so there aren’t a ton of features and buttons that distract from the display?’ Ive (head of design) asked. At every step Jobs pushed to remove and simplify.” (page 514)

    With the story of the development of each product it is easy to see why Jobs nearly drove those around him crazy. It was normal for him to walk around and look at the work of designers and engineers and immediately pronounce their work to be crap! And, a week later he would be gushing about the very same thing he labeled “crap” a week earlier. It was also normal that the work on the new product would be almost finalized, or finalized in the mind of others, and he would wake up in the middle of the night and realize why he was not comfortable with its design. The radius of the corners was wrong! Or, the ionized aluminum casing wasn’t exactly right. He would stop everything and have the entire team working on the product go back and fix things based on his simple feel for the design. Inevitably he would be proven right. And in every case it was a matter of the flow, the movement of the eye and mind from one interaction with the product to the next. It was about “lean” although he would not have felt the need to label it as such. It wasn’t the lean of the factory, but the lean of the customer experience.

    I doubt that any CEO in the history of business has been as intimately involved in the design of breakthrough products. His contribution was not that of a traditional executive at all. It was total intimacy with the customer experience that was his contribution.

    Costs vs. Value

    The way lean is implemented in many companies today it is viewed as primarily a cost reduction tool. Eliminating work-in-process, reducing the need for space, and increasing output per employee are all the natural results of lean and all result in positive impact to the bottom line. Rarely was reducing costs the primary motivation behind Steve Jobs’ decisions. The decision to open retail stores provides a telling example.

    Jobs obsessively wanted to control the entire flow of work from the design of chips to software, to the design of the case, the screen and the packing. This was the motivation for his decision to open Apple Stores. He and Ron Johnson spent many months designing the stores, developing prototypes and obsessing on every detail. From a traditional retailing perspective it made no sense. They didn’t have enough different products to fill a store. Most analysts thought it would be impossible to push enough product through the stores to justify the cost of the space. Gateway was failing miserably in their retail stores and Dell was selling direct to customers. But that is not how Jobs was thinking at all. He was thinking about the brand, the customer experience, the joy that the stores would create.

    Larry Ellison, the CEO of Oracle was a close friend and Steve repeatedly invited him over to walk through his prototype store.

    “On each visit Jobs prodded Ellison to figure out ways to streamline the process by eliminating some unnecessary step, such as handing over the credit card or printing a receipt. ‘If you look at the stores and the products, you will see Steve’s obsession with beauty and simplicity – this Bauhous aesthetic and wonderful minimalism, which goes all the way to the checkout process in the stores,’ said Ellison. ‘It means absolute minimum number of steps. Steve gave us the exact explicit recipe for how he wanted the checkout to work.” (page 386)

    That is lean thinking at its best.

    Most experts predicted failure. “Maybe it’s time Steve Jobs stopped thinking quite so differently,” Business week wrote in a story headlines “Sorry Steve, Here’s Why Apple Stores Won’t Work.” The retail consultant David Goldstein declared, “I give them two years before they’re turning out the lights on a very painful and expensive mistake.” Gateway’s stores were averaging 250 visitors per week.

    On May 19, 2001 the first Apple Store opened in Tyson’s Corner Mall, one of the most expensive retail properties in the country. By 2004 Apple stores were averaging 5,400 visitors per week! That year they had $1.2 billion in revenue, setting a record in the retail industry. In July 2011, a decade after the first store was opened, there were 326 Apple stores. The average annual revenue was $34 million, and the net sales in 2010 were $9.8 billion. They were not only profitable, but they boosted the brand and reinforced everything else that Apple did.

    The development of Apple stores and Apple products demonstrated an aspect of lean thinking that is not understood by most lean practitioners. It is not simply about cutting costs. It is about creating value in the customer experience by optimizing flow.

    The Lost Opportunity of Bureaucracy

    Many lean writers and practitioners have not been willing to step up to the plate and address the issues of organizational structure and systems. But, if you don’t you are not likely to be lean. The story of Sony’s lost opportunity and the development of the iPod proves the point.

    Sony had a music division and contracts with a large number of the most popular bands and artists. They were a dominant force in the music business. They had another division that had created the Walkman, a personal device to carry and play music. They had a computer division producing personal computers. They even had software to sell music online. And, at the time, they realized that Napster and other free music download websites were destroying the profitability of their business. It was out of control. Within the Sony brand they had every piece required to solve the problem. However, the three big and powerful divisions fought among themselves and could not collaborate to develop a solution.

    At Apple Computer there was a leader who understood disruptive technology. It wouldn’t be unfair to call Steve Jobs the Crown Prince of disruptive technologies. At that time Apple was merely a personal computer company. They produced no personal or portable devices. But, Jobs loved music. He understood that the personal computer could be the music hub. He personally led the charge to develop the iPod and there were no warring divisions within Apple. Jobs personally met with music royalty including Bob Dylan, Bono, the head of Universal, Sony and other music studios. He went to Japan and found the disc drive at Toshiba that could hold a thousand tunes. He developed an end-to-end solution that met the needs of the artists, the music studios, his own company, and most important, the customers who loved music! He practically lived with Jony Ive, the chief designer, whose aesthetic sense of elegant simplicity for not only the device, but even the packaging, created a unique brand image and advantage. The combination of iTunes software for your computer, the iTunesstore, and the iPod, met the needs of all key stakeholders. It was a victory of seamless integration. It eliminated waste in every component of the music delivery process. It could only have been achieved by an organization devoid of silos and a leader who understood the advantage of a seamless experience by the end user.

    In every instance of product development and marketing, Steve Jobs understood and demonstrated how eliminating waste from the flow of work and the flow of the customer experience results in the creation of value. Perhaps more than any other executive in our lifetime he understood the interdependence of the human and technical factors in product development and in their use. This is the lean that needs more of our attention.

    This article was from Larry Miller’s website “Management Meditations


  3. Insights from an innovator of customer-focused excellence

    February 24, 2014 by
    Originally posted by Christine Schaefer on Blogrige: The official Baldrige blog

    Dr. John Timmerman

    Dr. John Timmerman

    We could all learn a lot from Dr. John Timmerman, senior strategist of customer experience and innovation at Gallup. In his former work as corporate vice president of quality and operations at The Ritz-Carlton Hotel Company, Timmerman helped build ground-breaking practices that strengthened the customer focus of the luxury-brand service organization, which earned two Baldrige Awards in the 1990s.

    In a recent article in Gallup Business Journal, Timmerman points out that innovation, rather than merely incremental improvement, is a necessity for organizations facing rapid change in their strategic situations today. In a subsequent interview for this blog, Timmerman first distinguished “little i innovation” (of processes and products) from “big I innovation” (of the organization’s business model). “Business-model innovation leverages the entire workforce, with everyone in the organization having a role in innovating and moving the organization forward,” he pointed out. “For that kind of innovation, Baldrige [the Criteria for Performance Excellence] provides the best-known framework to help an organization.”

    Following are more excerpts from the interview.


    How do you see the role of the Baldrige framework (the Criteria for Performance Excellence) in supporting innovation?

    To transform an organizational structure there are two different ways of thinking that are interrelated. We can get everyone to be involved in innovating in all of their areas as an ongoing part of their role and responsibility. We can also innovate the business model. And then those two things can also be part of one and the same—in other words, if you’re incorporating innovation as part of your cultural fabric, you can do that while you’re using business-model innovation at the very highest level.

    If a senior leadership group wants to innovate their business model, Baldrige offers an already well-defined framework. [Baldrige] Award recipients provide the best practices for an organization to consider because they are already vetted through the Baldrige examination process.

    In the Gallup Business Journal interview, you make the case that quality is still relevant, stating, “I believe you can have quality—zero defects—without innovation, but you can’t have innovation without quality processes, the systematic and repeatable methods to foster speed and agility.” How might you recommend making the case to business executives to invest in resources related to improving quality and achieving excellence?   

    When people see the term quality, they think of controlling defects and risk mitigation. That’s one side of the definition, having a repeatable process to identify and eliminate defects like Six Sigma. But quality is also about having repeatable processes to foster transformation, innovation, and rapid improvement cycles in an organization. And I think it’s a problem that executives sometimes don’t see the other half of the coin or definition. So when the term quality comes up, I think they default to defect mitigation, which is a repeatable process, but not the repeatable processes in fostering performance excellence and improvement.

    When I look back at Ritz-Carlton, I see that one of the biggest benefits of going on a [Baldrige] journey is that we identified the gaps through the performance excellence framework and then we went out and studied other organizations and saw what their best practices were, which fed our improvement strategies, not just to close the gaps but to become much more competitive.

    I don’t see as many organizations doing that kind of structured benchmarking today as I have in the past. I think they’re trying to glean stuff as everything in the world is moving so fast. So they bring somebody in, a thought leader that already knows the answer, or get it through some knowledge resource. And that’s good, but it may not give you the deeper insights you need. It’s one thing to read the Toyota production process; it’s something very different to go to Toyota and see how it’s applied, because then you get the cultural context.

    And what the Baldrige process allows you to receive when you listen to the [award] recipients is the cultural context, so that you know how to fit in the best practice within the organization. The brilliance of Baldrige is that it puts organizations on a stage where they share not just best practices but also the organizational profile, the cultural context of how practices fit in—not just the good idea but how the good idea fits in within the organization. As a Gallup scientist, I believe that you need to guard against committing an FAE (fundamental attribution error) in trying to apply a good tool to the wrong context. I encourage organizations to complete the Baldrige profile assessment because it gives them the context to assess the appropriateness of best practices for their business model.

    At the Baldrige Program’s annual Quest for Excellence® conference years ago, you shared leading customer-focused practices at the Ritz-Carlton at the time. Tell us about the evolution in the concept of customer focus during your career.

    Personalization has always been out there, but The Ritz-Carlton was one of the first companies to build a platform to do it across multiple sites. The Ritz-Carlton approach was to first create a customer-centric culture, training employees to study what customers are using to understand their preferences. Second, we wanted to be able to delight customers by surprising them versus being merely being preference order-takers. Each facility has a guest relations manager that provides leadership and training to engage employees in identifying, collecting, and delivering guest preferences.

    What are some new developments in the area of customer focus (category 3 in the Baldrige Criteria) by high-performing organizations today?

    The good news is that we’re continuing to make improvements in big data and analytics. That gives us what I call these mega constructs of customer profiles, or psychographics. So I can tell you what all the Chinese 19-year-old males want when they come into a restaurant or when they go buy a car, because I’ve got all this data pulled together from disparate sources. The problem with that though is that it’s a construct so it’s kind of like in The Matrix. And when you really want to dial into customer personalization, you’ll start to see the cat walk by you two to three times like in The Matrix movie; the construct doesn’t always work [at the individual customer level]. The good thing that’s happening is that we’re starting to get a better big-data analytic understanding of what customers want by cohort, by geography, by buying patterns, and so forth. But that has to be balanced with an understanding of what customers want at an individual level. So the companies that are going to be really successful in the future will understand leading trends, those constructs, but they’re still going to be able to leverage big data—that is, leverage global information resources, R=G—and design it to [the level of] n=1.


    Baldrige provides the holistic framework to assess all the dimensions of an organization required for driving excellence.


  4. Working Towards a Citizen Centered Government – Keynote Presentation in New Zealand

    November 13, 2012 by BPIR.com Limited

    Art Daniels has over 40 years’ experience in managing and developing institutions in the Canadian public service. He is widely recognized as a leader in implementing public sector change initiatives particularly in citizen focused reform initiatives. Art will be giving a keynote presentation at the World Business Capability Congress, 5-7 December 2012, Auckland, www.worldbusinesscapabilitycongress.com and assisting in the Pre-Congress 2-Day Workshop – Achieving Customer Centricity, 3-5 December 2012, Auckland, http://www.worldbusinesscapabilitycongress.com/achieving-customer-centricity

    In preparation for the Congress, Art has answered the following questions:

    Questions:

    1. As a recognised leader driving Canadian public sector change and customer focus reform initiatives, where do you think our public sector could improve?

    In Canada, we established the Institute for Citizen Centred Services in1998. It is a pan Canadian institution where all levels of government share research on the needs and expectations of Canadians as customers of public services. By understanding their expectations, the government has been able to improve their services every year. What they learned is that services could be improved through easy access, timely responses and services bundled around the needs of the customer.

    1. How could improvements be made at a time of decreased (real) budgets and redundancies? Could ‘lean government’ be just an ineffective as ‘bloated government’ but with less public money?

    The recent research in Canada shows an interesting dichotomy in citizen’s expectations of government. As more services are provided on-line or digitally, service results improve as they are more individualized and services are bundled around the needs of the citizen. Services in the past which were provided by a range of government agencies and departments left the customer frustrated. Now that governments are more collaborative and bundling services, the customer experience is more satisfactory. For example, “the lost wallet strategy” means that with one visit to one site, the customer can replace their driver’s license, health card, birth certificate, passport and other identification that had been lost together. This streamlining or bundling of services is part of lean government which is cost effective and reduces service time.

    1. Could any of the successes in Canada be transferred to NZ?

    We are very pleased that the government of New Zealand has partnered with the Institute of Citizen-Centered Services in Canada to provide some of the same research tools used in Canada. In New Zealand, what we refer to as citizen centered research, is called Kiwis Count. They are also using our Common Measurement Tool which allows governments to benchmark their services with each other using common questionnaires.

    1. What are the benefits of your recommendations?

    The benefits of these initiatives has resulted in government service ratings improving from a low of 48% satisfaction in 1998 to 72% satisfaction in 2012 with some services achieving over 90% satisfaction, such as fire services. The move to more digital services has allowed governments to not only improve its services but, also to effectively downsize the public services resulting in savings of labour costs. Routine clerical transactions that were provided over decades by clerks which often took weeks to complete have now been replaced by online services which can be provided instantaneously. For example, from my own experience, is the registration of a small business in Ontario. In 1998, it took 62 working days to complete this transaction; it is now completed online on the same day. In fact, the government guarantees that if they fail to complete the transaction in one day, the service is free.

    1. What culture change, within the public sector, is needed to enact change?

    The culture change which is most required in public service is a shift from a bureaucratic set of processes designed to suit the organization’s needs to a customer service culture where the needs of the customer direct the service. The important shift to a customer centered culture is when organizations move from working independently to collaboration. This is referred to as “connected government” or “joined up government”.

    1. If there was one key message you wish to convey to policy makers and business leaders in New Zealand, what would that be?

    For decades, both businesses and governments have worked in silos but, are now beginning to recognize the need for collaboration in government or strategic alliances with the private sector. Governments are also starting to recognize that partnerships with the private sector in the delivery of services can be more efficient and effective. The “holy grail” for public service reform is meeting the expectations of citizens that services can be co-ordinated around their needs rather than the needs of individual ministries, departments or branches.


  5. Service Excellence Initiatives in Europe

    November 16, 2011 by

     

    Many counties have established frameworks to improve customer service. These are often called “Service Excellence Frameworks” and are usually derived from Business Excellence Frameworks such as Baldrige and EFQM.

    To achieve high levels of service excellence organisations need to focus on areas beyond customer delight and customer experience, areas such as service leadership and service planning.
     
    Research was  conducted by Jurgita Adomaityte to explore the penetration of Service Excellence initiatives in 34 European countries.

    In summary, the findings were:

    • 26 Service Excellence initiatives in 17 countries
    • 17 Countries with no Service Excellence initiative
    • 11 Service Excellence Awards in 9 countries
    • 10 initiatives were limited to certain sectors such as tourism and call centres

    To read the full results table click here.

    Ahmed Abbas
    BPIR.com