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We are continuing to build the model and consider measuring value as
determined by the customer as evidence of customer satisfaction.
See the graphic.
As seen in the
graphic measuring value is strictly a customer satisfaction issue.
No matter what the product or service the customer determines with their dollars the value proposition. It
is possible to change that understanding through
a variety of efforts on your part but make no
mistake the customer's satisfaction is the ultimate value
measure of what is offered. Six sigma seeks to understand that
value from the view of the customer and enhance the
value in a way that is advantageous to both the customer
and to the organization. With increased customer satisfaction the likelihood
of customer loyalty increases.
Some organizations because of unusual circumstances find themselves in a high
sales environment with unusually high margins. Not
infrequently people can practice enough self
delusion to convince themselves that the customer satisfaction is high and customers agree
that there is adequate value involved, when the real
reason is some sort of market place discontinuity. That is not to
say that there is not a lot of money to be
made during these times.
"Pet Rocks" were a nice fad that made handsome
profits for some people but no one really
thought that the value was there for the price paid. As a
fad it died in a very short time. If your business seeks to capitalize
on this sort of market place, just realize
that it is short lived and the value comes from the unique idea, not
from some underlying value or need in society.
Any new idea or product is in the position of trying
to balance the true value and the
"newness" component. A classic of this is
the early Ford Motor Company. Henry Ford insisted on driving the
cost of cars down and making them inexpensive so the
market could become bigger and bigger rather that selling
fewer cars at much higher prices. Yet when the
consumer tastes evolved to wanting colors other than
black, that was seen as a fad that would increase the cost and would
soon disappear. What almost disappeared was the Ford Motor Company.
The changes in customer tastes can be surprisingly fast, if your processes
do not have the cycle time
capability to respond others are likely to meet the changing customer
desires.
Few organizations can wait on the market place to inform
them of exactly what the value of the product or service, even
the Ford Motor Company barely survived a miss reading.
Yet in many cases if too much time is spent on study
and evaluation the profitable opportunity may have passed.
Small organizations have the ability to react and
change rapidly, yet a few large companies are able
to keep their product pipeline filled with
profitable innovation. 3M each year expects
to have 40% of the sales revenue from products that are
less than four (4) years old. In some businesses it
takes that long to get approval for model changes of the
same product. One of the most important competitive
advantages in the market place today is speed. Cycle time
reduction in addition to eliminating waste has the
real benefit of providing more opportunities
to learn. Every cycle is a learning opportunity. For those
who learn in every cycle, if
they just complete the cycle one more time than you in the
same time frame, will in short order build
a huge competitive advantage because they have learned and know
more.
As can be seen from the graphic the customer
value will drive re-design and evolution of your
products and services. This Voice of the
Customer combined with technical consideration
drive the product and service evolution. Those
who are not staying ahead of this evolution will
soon suffer. Videos are a good example. The Beta Max from Sony were
first to market and from what I am told a superior
technical product to VHS, yet VHS with
inexpensive players and
a marketing move to get a wider variety of movies drove the Beta Max from
the field. One of the places that we
believe six sigma has great potential, that is largely untapped,
is in the marketing functions of most companies. When the
marketing, design, manufacturing and design
all become a team focused on driving customer value breakthrough has
generally be achieved.
One method of measuring value is to consider the defects in the
entire process of delivery to the customer.
Lower defect levels will be of higher value. With
six sigma the concept of rolled through yield
is very important. If defects occur in multiple places or stages before
reaching the customer they can all be added
together to get the total number of defect per unit.
Using a Poisson approximation the
Yield = e **-DPU.
(Yield is equal to e with the exponent of
minus the defects per unit). Note that if you average 1 defect per
unit the yield is 0.36788. Some have
multiple defects and about 36.7% will make it through
without any defects. Where anything that is less than the
expectation of the customer is a defect. Doing some simple math
63.3% of the customer interfaces will have a defect. There
are multiple surveys that indicate that less than 4% of
customers will ever complain. 4% times 63.3=
2.532 or approximately 3%. Which means that if 3% of your customers
(each transaction being counted as a unit) complain then
you have a defect rate averaging 1 per unit.
In the December 2000 issue of Quality Progress Gregory H.
Watson suggests that there are three logical categories for failures
or defects. First the product or service does not meet customer
expectations, second the price is not appropriate for the customer to see
sufficient value and third the delivery in not with in the
required time frame for the customer. The assumption here is that all
defects are the same in the eyes of the customer.
This view of measuring defects from the perspective of the customer is
essential if you are going to move the
improvements through six sigma from incremental internal
improvements to the dramatic customer focused changes that
are found with World Class Performance.
All of the non-product related defects are now
considered in the yield. Here our yield is customer satisfaction.
The implications of a 3% complaint
rate by customers are terrible. Only by chance are you able to produce
defect free product or service 36.7% of the
time and all of the remaining products or services have at
least one defect and some multiple defects. Few businesses can survive with
that level of poor performance.
Measuring value is more than just considering the value
of a product being delivered to the customer as intended. The
value has to consider the total customer experience, including
all of the support services such as logistics, accounts receivable, etc.
Quotes that Inspire
The greater the obstacle, the more glory in overcoming it. Moliere
It is easier to do a job right than to explain why you didn't."*Martin
Van Buren {1782-1862 8th President of the US}
"I long to accomplish a great and noble task,
but it is my chief duty to
accomplish small tasks as if they were great
and noble." Helen Keller {1880-1968
American Blind/Deaf Author & Lecturer}
If you do not change direction, you may end up where you
are heading." Lao-Tzu
Never give up!
23 publishers rejected Dr.Seuss's first book.
Michael Jordan's high school basketball team cut
him.
21 publishers rejected M*A*S*H
Henry Ford went broke five times before succeeding.
He who finds diamonds must grapple in mud and mire
because diamonds are not found in polished stones. They are made. Henry B. Wilson
It is not so much our friends' help that helps us as the
confident
knowledge that they will help us.--Epicurus
People who are unable
to motivate themselves must be content
with mediocrity, no matter how impressive their other talents.
Andrew
Carnegie
The best is good enough. German Proverb
I have simply tried to do what
seemed best each day, as each day
came. Abraham Lincoln
The Serenity Prayer
Lord, Give Me The Courage To Change The Things I
Can.
The Serenity To Accept The Things I Can't .
The Wisdom To Know The Difference.
The smallest deed is better than the grandest
intention. Larry Eisenberg
Cary W. Adams
10A Bayou RD
Lake Jackson, TX
77566
1-979-297-5198
cadams@adamssixsigma.com
Previous
Newsletters
Customer
Loyalty and Customer Satisfaction. Competitors
Competition.
Distribution, Products, Services, Work
Flow.
Suppliers Supply Chain.
Employee Development
Empowerment Motivation.
SWOT Analysis Business Plans
Strategic Planning. Leadership
Training Leadership Skills. Measure
Value Customer Satisfaction.
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