“Hot topics” SeminarPortsmouth Business School

21 June 2006

Strategy: where do you start to improve a company?

Professor Michael KayeEmeritus Professor of Operations and

Quality ManagementUniversity of Portsmouth

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Overview of presentation

• Customer value and competitiveness: latest research findings

• Customer Value Management as a competitive strategy

• Transforming the organisation using “Lean Methods”

• Successful implementation of a Customer Value Strategy

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The Evolution of Quality

STRATEGICQUALITY MANAGEMENT

QUALITY ASSURANCE

QUALITYCONTROL

INSPECTION

1900 1920 1930 1940 1950 1960 1970 1980 1990 2000

COMPETITIVESQM

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Evolution of qualityCompetitive mix

Quality emphasis in 1980’s

Strategic Quality emphasis in 1990’s

Competitive Quality emphasis in 21st century

Design Fitness for purpose Integrated application of technologies

Building in the voice of the customer

Reliability Right first time “to be the best”

Right every time “ahead of the best”

Reputation as role model for best practice in anticipating customer needs accurately

Productivity Performance/operational costs

Life-time costs/economic access to new technology

Strategic partnerships enhance responsiveness and optimise resources

Delivery and dependability

5 star response to repeat orders

Matching customer’s strategic milestones

Predicting customer needs

Service (after sales)

Prompt after sales Continuous support Relationship management on-going

Promotional follow-up

Build up customer confidence

Build up customer strategic commitment

Strategic alliances with customers to enhance

their competitiveness

Customer ValueManagement Strategy

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Latest research findingsinto customer valueand competitiveness

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Organisations involved in the research

• 70+ organisations • Cross-section of organisations operating in

public, private and voluntary sectors (including manufacturing, service, defence,

health, criminal justice, high-technology, central and local government)

• Small, medium and large organisations • Geographical scope of operations - UK, Europe,

International (Far East and South-east Asian), global industries

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Challenges to achieving competitiveness:

our research findings1,• Over-emphasis on financial business drivers with little

emphasis on customer value as a driver• Organisations were operating in crisis mode i.e. being buffeted

by a rapidly changing and turbulent environment – reactive not proactive in setting strategy and planning

• Organisations were not designed for the responsiveness needed to achieve and sustain competitiveness

• There was a need to satisfy a complex web of stakeholders and customers – confusion and conflicting customer needs

• Measurement systems were lacking• Overload of management initiatives• Strategies were not effectively deployed

¹Kaye M M & Dyason M D (1995, 2006 forthcoming publication)

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Characteristics of high performing organisations

• Active involvement of top management in the regular strategic review of customer needs, and in the creation of a realistic long-term strategic vision that takes account of market complexity

• Rigorous management of the processes that deliver customer value

• The ability to design new processes that build in the “voice of the customer” and assure responsiveness to changing needs

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• Sustainability and what this means in practice in continuing to meet customer and stakeholder needs and expectations and to survive in an increasingly competitive environment – having the appropriate infrastructure and people skills to adapt quickly

• Managing relationships between those engaged in the supply chain and how the effectiveness of these interactions can be measured

• A clear understanding of “customer value” from the perspective of the customer, not the business, translated into a “customer value management strategy”

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Achieving and sustaining competitiveness

through customer valuemanagement as a strategy

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Customer Value Management

The strategy of Customer Value Management offers an opportunity to understand the relationship between customer satisfaction and key processes and to track improvement in business results or competitive positioning over time

The focus shifts from reactive … through proactive … to predictive

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Aim of a Customer Value Management Strategy The aim of a CVM strategy is to provide products and

services to customers that are perceived by the customer to be of greater value that they could expect to purchase or receive from the competition in similar markets (competitive advantage or “best value”)

The CVM strategy must provide:

– a focus on customer perception of value

– the means to identify the key criteria or quality attributes of value to the customer and their relative importance

– the means by which customer needs are broken down into actionable parts and linked to internal process measures

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Customer value and sustainability – extent to which key processes reflect the voice of the

customer• Successful outcomes depend upon managing the

interdependencies between suppliers in order to speed up delivery and reduce cycle times

• Emergence of “virtual organisation” characteristics to provide flexibility, speed of response found to be lacking in traditional functionally structured organisations– Flexible boundaries– Innovation– Optimising access to information and technology

• Customer involvement in designing product or service– Customer profiling and recognising differing needs

and expectations

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Examples of leading-edge customer value strategies from our research

• The application of “virtual organisation” principles to the supply chain: the boundary-less organisation, resulting in fewer defects and faster cycle-time (Far Eastern leading electronics company)

• The design of a new process for logistics department, integrating the “voice of the customer” into the process. Collaboration with supplier, investing in latest logistics technology so that customer needs are met every time (Global motoring parts manufacturer based in South America)

• Lean manufacturing methods, including six sigma successfully pioneered by Motorola applied to key processes in NHS hospital and to UK criminal justice system in order to reduce waste and delays in work-flow

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• Competitive benchmarking – key customer processes, sharing of communication tools and methods between leading European mobile communications company and the UK police

• High value manufacturing companies including a strong base in production with unique processes, high brand recognition, or highly customised services (Cadbury Schweppes, Pfizer

• To determine appropriate key process improvement strategies so that the organisation works more effectively together (cross-functionally) to produce a product which meets the expectations of customers and stakeholders

• Design, deployment and regular review of customer-focused organisational development strategy and performance management framework in global steel manufacturer in order to achieve and sustain greater competitiveness. Baltic company now competing in volatile market place.

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Achieving and sustaining competitiveness

through customer value: transforming the organisation

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Organisation Transformational Model

LeadershipTotal management involvement

Vision

MethodsBenchmarking

Quality improvementTools, including lean methods, six sigma

Voice of Customer(Servqual), Design of

Experiments

PeopleInvolvement

CommunicationTeamworkTraining

Reward and Recognition Strategy

Innovation - InventionProcess quality

CUSTOMERVALUE

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The 5 “principles” of Lean Methods with Six Sigma

1

2 6σ

Specify valuefrom the point ofview of the customer

Identify the valuestream for eachproduct orservice

4

3

5

Make valueflow withoutinterruptions

Let the customerpull value fromthe producer orsupplier

Pursueperfection

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6σ

Benchmarking

Pro

cess

dri

ven

vi

rtu

alo

rgan

isa

tio

n

Def

ect

red

uct

ion

Analysis of variance

Customer-focused strategic driverBalanced Scorecards

Vo

ice

of

the

Cu

sto

mer

-S

ervq

ua

l

Problem Definition

Pro

ce

ss

Ma

na

ge

me

nt

Tools and techniques used in the study

Problem solving

Define

Measure

Analyse

Implement

Control

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Successful implementation

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Based on our experience, the following is critical for successful implementation:

• Approaches used (i.e. methods and “jargon” fits the culture of organisation)

• Practical relevance using tried and tested methodologies (e.g. deployed flowcharts, six sigma, Servqual)

• Flexibility of learning options to suit the needs of the organisation and learning styles of individuals

• Training supports job and “project role” needs - minimal time away from job

• Learning materials (e.g. Statistical process control examples) are based on clients’ own data

• Continuous learning opportunity: methods are being applied to other projects

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Best practice pointers in ensuring successful implementation

• Careful project selection – all projects justified against carefully selected criteria, based on customer impact, cost, effort, feasibility etc.

• All improvement projects linked to strategy and the need to address customer value issues

• Top management on-going involvement• On-going support for those learning• Realistic benefit realisation plan• Assign ownership for reporting and follow-up

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Strategy – where do you start to improve a company? –

Key features of a Customer Value Management Strategy

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• Customer value must be embedded in all aspects of the organisation – leaders must establish a process by which this is reviewed and sustained

• Let the customer drive the business, not pursuit of profit. Maintain a regular review of competitiveness from all angles, not just financial.

• Measure the performance of important features or activities that add value to your customers and make your organisation competitive

• Sustain high performing key customer-focused processes, free from defects and waste and “non-value added” activities

• Be proactive in forming partnerships and collaborations with suppliers and customers in order to mutually enhance competitiveness

• Look outside the organisation for leading-edge practices that could help to exploit a market opportunity – think innovatively and adapt the learning so that it works for your organisation

• Generate and sustain a culture that is excited by growth and innovation - align the reward and recognition systems to the achievement of strategic goals

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References: Selection of author’s publications and other key texts

Publications• Kaye M M and Dyason M D (2005) 49th EOQ proceedings, Antalya, Turkey, A model for managing complex stakeholder and customer

relationships• Kaye M M and Dyason M D (2004) 48th EOQ conference proceedings, Moscow, Russia, Increasing Confidence in the Criminal Justice

System by the use of Customer-focused Models• Kaye M M and Dyason M D (2002) Order in court (Part 1) and The Retrial (Part 2). UK Excellence, October/November pp 28-29• Kaye M M and Dyason M D (2001) Applying six sigma in the public sector Quality World, January pp 33-35• Kaye M M and Dyason M D (1999) Customer value-driven strategies. Total Quality Management. Vol 10, Nos. 4and 5, pp. 594-601.• Kaye, M M and Anderson R (1999) Continuous Improvement: The Ten Essential Criteria International Journal of Quality and Reliability

Management, 1999, Vol 16, No. 6, pp. 485-506.• Kaye M M and Dyason M D (1998) Achieving a Competitive Focus through Self-assessment. Total Quality Management Journal, Vol 10,

No. 3 pp 373-390.• Kaye M M and Dyason M D (1995) The Fifth Quality Era, Total Quality Management Journal, January, Vol. 7, No. 1 pp. 33-37

Forthcoming Textbook: Customer value strategies – the lean road (John Wiley)

Forthcoming Papers

• Organisational Transformation through the use of Customer-focused Models (Total Quality Management Journal – Carfax Publishing)• A model for managing complex stakeholder and customer relationships (International Journal of Quality and Reliability – MCB University

Press)• The Impact of a more customer driven focus on organisational design in the public sector (Public sector journal yet to be determined)

Other key texts and references• Pande P S, Neuman R P, Cavanagh R H (2000), The Six Sigma Way, How GE, Motorola and other top companies are Honing their

Performance, McGraw-Hill• Womack J P, Jones D T, (2003) Lean Thinking, Free Press Business Management• Kaplan R S, Norton D P (1996) The Balanced Scorecard: translating strategy into action. Harvard Business School Press• Livesey F, (2006), Defining High Value Manufacturing, Institute of Manufacturing Sponsored Study, University of Cambridge

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Thank you

Enquiries are welcomed about our work.

Contact details: 023 92 844117

michael.kaye@port.ac.uk