Executive Decision Making in a Customer-Centric Org, Part 1
As a strong believer in Deming’s school of thought regarding the customer-supplier relationship, I believe that it should mimic a partnership. That kind of interaction reassures the supplier that establishing a culture of honesty, customer focus, continuous improvement, and other supportive behaviors will create a mutually reinforcing association between supplier and customer that encourages quality and overall cost reduction.
One of this month’s interviewees suggested that this is the polar opposite of how he presently feels treated even by some of his longer term customers. He says it’s all about cost and nothing else matters. My take is that if you allow your organization to find itself in a position where the value you add for the customer is based only on punctuality and price, you are destined to fall on very hard times as an American manufacturer.
At times like this it’s easy to overlook, downplay, or simply delay attending to key elements of the decision making process. Here are three of the top six major executive-level pitfalls that will cause havoc in the business if left unaddressed or unbalanced.
Pitfall #1: Lack of a balanced decision making process.
Profitability is the top business driver in any business. One approach to remain profitable is cost cutting. It normally boils down to finding operational efficiencies and ultimately results in lower relative headcount. However, many managers get so good at these decisions they forget to sufficiently develop the other side of the equation: prioritizing for revenue growth. In fact, they often don’t learn how to make good decisions on when, where or how to invest, or how to cultivate innovation. What often results is a slowed decision process; awaiting infallible data which once received will make the proper course of action obvious. But by the time such data arrives, your competitor has made its move. This type of decision making, with its analysis paralysis and infinite attempts to assure ROI, ignores the fact that had the decision process employed VOC at its core, decision quality and speed would be optimized. The recommendation is to balance decision making such that operational efficiency isn’t emphasized at the expense of VOC based strategic alignment aimed at growth in quality earnings.
Pitfall #2: Lack of a solid competitive strategy.
When a developed and communicated strategy within the organization is lacking, organizational focus will often shift toward cost cutting. Cost cutting, while glamorous, visible, necessary and often easier to do, does not itself result in growth. One contributor to this article summed it up well, saying “I’m pretty sure we cannot just shrink this organization to greatness”. This brings us back to the power of VOC and a Deming-like engagement model, which reinforces the decision making balance between cost cutting and growth.
As cost cutting frees resources to apply elsewhere in the business, clear, broad understanding of the strategy will focus spending, allowing managers to consider whether a new investment will achieve the desired effect and whether all competencies to fully execute on the project are in place.
A simplistic example of this is a buying new high productivity machine tool and not having a critical element in place. The sales force, skilled programmers, operators, or QA staff (particularly for validation and performance optimization) can all be critical to filling capacity and meeting the required return.
Another example is deciding you’d like to double sales and improve profitability by 150% in the next two years. With this objective, what needs to happen? Starting by determining our core market, customers and their needs, how would we develop the new business? What are all the program or business components that need to be resourced and available? Which milestones can be used to measure progress and make adjustments? And, just as our government should now be asking, should other business activities be scaled back to fund the new strategic investment?
A fully developed strategy which aligns core competencies to a VOC driven customer centric vision will have a healthy binding effect on management execution and consistent, and manageable organizational performance.
Pitfall #3: Metrics and telemetry.
There is often a discussion on data versus information. Data is simply a fact, where information in actionable and may simply be a more appropriately combined set of data points. In the past we use the term “metrics” to represent various operational measurements. I prefer to use a term one of my long time business partners uses- “telemetry”.
A quick look at definitions of the term telemetry yielded “wireless transmission of measurements and data from remote sources; remotely monitoring environmental conditions; measureable evidence of phenomena under investigation; measurement of distance from any angle”.
In managing a business we need all the above types of data /information to show up routinely in order to analyze if we are on target towards meeting our strategic objectives, or to suggest directional changes in our approach. In the old days it was simply the periodic operations review, or annual quality review. Today it is real time.
In today’s virtually wired world so much information is available that it can be overwhelming, yet many do not take advantage of this. The growing companies do, and in ways hard to imagine if you are not on the forefront of modern information technologies. They are staffed and wired to feed this into VOC and decision making processes. Every organization must get started by determining, then monitoring telemetry that will assess the environment they serve (markets, customers, competitors) and their own environment that provides the service (company culture and execution).
We have covered the first three pitfalls or red flags one should look at when transforming or strengthening a company and its decision process. Next month we will look at the final three: failure to educate and begin to virtualize appropriate business processes; lack of innovation; and, failure to honestly assess the competitive landscape and your team’s strengths and weaknesses.
For More Information:
Quashnick Tool Corporation
A Series of International Standards for Quality Management and Quality Assurance
Within each person is unlimited creative potential to improve shop operations.
An injection mold expert speaks out against high-cavitation molds. There is a time and a place for them, he contends, but they should not be chosen for financial considerations alone.