Strategic Importance of Aligning Six Sigma Deployment with Voice of the Customer
What is Voice of the Customer?
Voice of the Customer (VOC) is the identification of true customer needs and requirements. Organizations that align offerings directly to these needs are able to achieve best-in-class products and services.
Within the Design for Six Sigma framework (DFSS), VOC enables companies to achieve very successful new product and service market launches. Additionally within the Six Sigma process improvement framework (DMAIC), VOC enables companies to constantly improve overall competitive value proposition, increase market share and improve profitability.
Why Voice of the Customer is Important
According to the National Institute of Standards and Technology (NIST), U.S. corporations spend nearly $100 billion per year in failed technology projects due to poorly designed Voice of the Customer data collection systems. NIST also reports that 32 percent of software application projects, on which companies spend $300 billion annually, are canceled due to poor alignment with customer needs.
Other than from the design perspective, Six Sigma process improvement efforts that focus on cost reductions without VOC can jeopardize organizational competitive value proposition. An example would be not taking into account customer loyalty and its impact on revenue when making process changes. The strategic alignment of the Voice of the Customer to a Six Sigma deployment helps a company better align its offerings to the needs of its customers which simultaneously helps prevent customers from doing business with industry competitors.
The VOC concept has been successfully applied in all competitive industries including financial and insurance services, retail, healthcare, software development, hospitality, telecommunications, pharmaceutical, logistics, non-profits, publishing, residential and commercial construction, transportation and manufacturing. VOC Six Sigma deployment has also been successful within higher education, government service and defense applications.
Identify Your Customers
Any person or organization that receives a product or service from a company is a customer. There are three basic types of customers. External customers are the individuals or organizations outside of the business that pay money for the products and services. To better understand who these customers are, the organization should segment them economically (e.g., by revenue, frequency of purchases, cost, etc.), descriptively (e.g., geographic, demographic, product feature, industry, etc.) and attitudinal (e.g., price, value, service, etc.).
Internal customers are departmental colleagues who receive products, services, support or other information from the process and use these outputs as their inputs to ultimately satisfy external customers. Lastly, there are regulatory customers who include any governmental agency that has standards which the products or services the company produces must conform to, such as the FDA, EPA, and OSHA. To be more profitable, companies have to serve customer needs more efficiently and convince customers to buy more of its products and services.
What Customers Want
Customers want value. This means products and services which have exceptional quality and quick delivery for the best price. Companies that can offer and sustain this value to its customers have the ability to gain market share, profitability and become market leaders.
According to The Discipline of Market Leaders by Michael Treacy and Fred Wiersema, there are three types of market leadership value propositions. The first is operational excellence in which the company focuses on delivering customers the best total price (e.g., Wal-Mart, Fed-Ex). The second is product leadership which focuses on delivering the best product or service and performance (e.g., Harley-Davidson, Microsoft). The third is customer intimacy which focuses on delivering the best total solution (e.g., Ritz-Carlton, Best Buy).
It’s important for companies to maintain a high level of competency in all three areas; however, the company should focus most of its energy in becoming the best in only one of the three areas. Companies that focus in either product leadership or customer intimacy are usually able to differentiate from rivals and charge more for product and service offerings. To achieve market leadership in either of the three value propositions requires an intense strategic Voice of the Customer focus.
Elements of an Effective Voice of the Customer Data Collection System
Within each organization’s product and service lifecycle, there are a number of touch points where the company interacts with its customers. Each touch point is an opportunity to collect data from customers and to influence customer behavior. Several touch point examples within an organization may include customer product/service inquiry, customer visits to sales channels, the actual sales transaction, customer service contact, warranty services, etc. Customers communicate through many different forms including compliments, complaints, product returns, contract cancellations, referrals, etc.
Companies that have a strong Six Sigma deployment connection with the Voice of the Customer actually have several similar characteristics to one another, regardless to being in different industries. Many of them are market leaders in one of the three value propositions outlined above. This demonstrates the return on investment (ROI) effectiveness of such a pursuit in terms of market share growth and profitability.
Most of these companies have implemented a fully integrated Customer Relationship Management system (CRM) which collects data at all customer touch points and is used daily by all employees, including sales staff. Another similarity includes having a solid customer-focused culture, as well as constant tracking of VOC data and improvement progress toward identified targets via highly visible executive dashboards.
It is common to find that these Six Sigma VOC aligned companies have a clear path of identified VOC issues assigned to an organizational executive leader for resolution. Additionally, these companies typically have ongoing analysis of the collected data identifying ways to improve the customer experience at each touch point.
Usually the CFO and financial team of these companies have been able to identify methods of conservatively measuring the revenue implications of poor customer loyalty and to establish a conservative estimate of the revenue value of a customer. This financial justification helps organizations’ executive leaders keep VOC a high priority. Most importantly, these companies have linked the VOC process to organizational incentives to help drive customer-focused behavior of its employees.
Six Sigma deployment aligned to the Voice of the Customer enables companies to constantly improve overall competitive value proposition, increase market share and improve profitability. To ensure that the Voice of the Customer is aligned within an organization’s Six Sigma deployment, it’s important to have top-down strategic support and a VOC company culture. Additionally it’s important to use traditional and advanced VOC data collection methods within each of the organization’s touch points to maximize customer value. Please see the Tactical Methods for Collecting Voice of the Customer Data article for more details.