Monday, August 15, 2011

The Customer is Calling

Nowadays we live in the Age of Cost Cutting. Companies are looking for easy and/or “proven” methods of saving money such as layoffs and elaborate improvement programs (see my previous posts). However, this single-minded focus on wringing costs from companies often clouds the most important aspect of the business: the customers. I once saw one of those “anti-motivational” posters that showed a telephone with cobwebs on it. The caption said something like, “Customers: if you don’t answer the phone, eventually they’ll stop calling.” Let’s look at this idea of customer satisfaction from several points of view: the first from the father of economics Adam Smith, the second from the Japanese perspective of customers and the last from the perspective of many western automotive companies.

Adam Smith, in The Wealth of Nations wrote: “Consumption is the sole end and purpose of production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer….”. He understood the real reason that business exists, to meet the needs of the market; more specifically, the needs of the customer. If a company cannot do that then they cannot continue to exist in the long-term. No amount of lean six sigma or LCC sourcing can stop that erosion. Just ask the pair of American automakers that went bankrupt when the market changed too quickly for their bureaucratic cultures to handle. They continued to lose market share to foreign companies that were more in tune with their customers. And then they simply failed.

The Japanese have a unique view of customer satisfaction. I visited Japan this past weekend (actually, I am writing part of this blog at Tokyo’s Narita airport). I went to my favorite cheap haircut place to get a haircut, since I haven’t found a barber in Shanghai yet. I was amazed again by the experience. The place is bare-bones, no TV, no radio, no plants. They don’t sell shampoo, they just cut hair. Two guys in their mid-20s quickly and skillfully cut hair for JPY1000 (USD12.73). You pay your money in a machine (exact change), get your ticket and wait your turn on a plain bench. And they do a great job. I was reminded, while the guy cut my hair, of the key to Japanese success in business. It’s something that I’ve mentioned in passing before but it really came to me during this weekend. The Japanese excel where many companies struggle: execution. They have near-perfect execution of their activities. You see this everywhere, from the general cleanliness of their cities to a $10 hair cut place. Everywhere they execute their activities flawlessly. Of course they make mistakes and sometimes their activities are not desirable; but whatever they do they do it very well. This also applies to customer service. They really treat their customers like a god (a common saying in Japan). You see this everywhere; the convenience store, the train station, the hotel, the bank, the airport. Japanese consumers are some of the most demanding in the world. Japanese automotive customers are also the most demanding, even more so in Japan. Their expectations are simple: just give them what you say you will give them. If there is a problem, understand it and fix it as soon as possible. This is how they run their companies and this is what they expect from their partners. I’ll continue this discussion in another blog series on how to work with Japanese customers. Suffice to say that the Japanese give the highest attention and service to their customers.

In contrast to the Japanese company culture about customers, many Western automotive suppliers treat their customers as one (or more) of the following:
  •  Adversaries that need to be outwitted or strong-armed. 
  •  Dupes to be tricked into accepting something that they shouldn’t. 
  • Interlopers who try to interfere with the company’s business. 
  •  Unreasonable, unknowable strangers (usually Japanese customers).
They fail to see their customers as Adam Smith and the Japanese see them. They refuse to accept their economic need to satisfy the customer—even the smallest customer, even the most difficult customer. Sometimes they even fail to acknowledge the customer when they are planning their activities. They usually personalize the customer to be the person with which they have the most interaction. The Salesperson sees the Buyer as the customer, the Engineer sees his/her counterpart and the Quality Engineer sees the plant supplier quality engineer. Each person sees their direct counterpart as the “customer”; this personalized customer is then placed into one of the above categories. This is the first mistake that these companies make, they personalize the customer. The customer is the company, not the individual person. No matter what they think about the individual person they should give their full attention and support to the customer. The second mistake is too much internal focus by all levels of the company, but especially the Management (the top level of the company/location/factory). Lean events, six sigma projects, 5S audits, layered audits, internal metric reviews (especially financial), etc. take so much time of most management members. If they pay any attention to their customers it’s either through dry performance metrics (which are practically arbitrary, like customer PPM) or through price negotiations (because it’s money). They rarely talk directly with the customers, they rarely visit the customers and they rarely think about the customers. Why is that? I think that it’s easier to focus on internal issues. It’s easier to deal with people who must accept that you are the BOSS and treat you as such. When I see the amount of attention and effort given to things like lean six sigma (as outlined in previous posts) and the absolute lack of attention given to customers I am really amazed. Customers are begging for updates on open issues, asking unanswered questions and are being generally ignored by various levels of the organization. And what does the Management do? Hold another lean event and try to squeeze a few more coins from the organization because it’s easier and it’s more interesting. Nobody wants to visit a customer and listen to them complain. But if you don’t listen to your customer’s complaints, you can guarantee that someone else will listen.

So how can companies meet and exceed customer expectations? A few ways are so basic, they shouldn’t need to be mentioned: answer the customer’s questions (in the way that they want, not the way that you want), give them attention (visit their office, visit their plant) and respond quickly to any comment/request/suggestion (even if the response is negative). Even though these are very basic, many companies still forget them. After the basics are covered, there are two main ways to win and keep customers (for manufacturing but especially automotive): consistency and innovation. Consistency is the core of quality management and so-called improvement philosophies such as six sigma. REDUCE VARIATION, REDUCE COST. Reducing variation is important for the internal functioning of the company and is important for the customer. Customers just want to know that you will consistently meet their expectations. Reducing variation helps you to do that. If you can do that, you are already ahead of some of your competitors. Innovation helps you to keep the business that you have but also helps you to win new business. It is the opposite of consistency in that it is a form of variation, but it is controlled variation. It must be contained within a structure of consistency; within those confines it is allowed to roam free. Innovation wins the heart of your customers; quality keeps them from wandering away in search of a new love.

Customers can be fickle, demanding entities. They have their own environment to work in and you are an important part of that environment. Don’t be disruptive to them and don’t ignore them. If they ask a question, answer it quickly. Try not to give so much focus on your internal activities and completely ignore the customers. Go ahead and hold your lean event, but take at least as much time to give your customer attention. Visit them, call them, and ask your team to send you a copy of their open issues. Pay attention to them and show your team that you will do so. This effort will pay multiple benefits to your customer and to your company.