Target Your Process Improvements to Increase Revenue and Market Share
One of the more significant findings from the Global Business Process Excellence survey, conducted by Six Sigma & Process Excellence IQ and Market Value Solutions, was that Business Process Excellence (BPE) deployments that are explicit outgrowths of competitive business strategies are nearly twice as effective as BPE initiatives that are not clearly aligned with competitive business strategies. (Click on images to enlarge.)
Moreover, those companies that had linked their BPE deployments to their competitive business strategies were also far more likely to have those deployments directed by customer input (either Voice of the Customer or Voice of the Market) than were companies that failed to establish that linkage. (Click on image.)
The implications are pretty clear: In order to maximize the impact of your BPE initiatives, you should ensure that those initiatives are an explicit outgrowth of your competitive business strategies, and that both the BPE initiatives and the competitive business strategies are driven by the Voice of the Customer or the Voice of the Market. Of course, that begs the question: How? How do you make those linkages explicit? What are the key challenges and how do you overcome them?
Make "Value" the Defining Metric
Too many businesses remain wedded to the metrics of customer satisfaction, despite the overwhelming evidence that satisfied customers are not necessarily loyal or profitable customers. In other words, the metrics of customer satisfaction are simply not predictive of business performance, and for two very simple reasons: They focus exclusively on your own customers (not those of your competitors), and they fail to account for the trade-off between benefits received (quality) and price.
And it’s for these reasons that the metrics of customer satisfaction are neither very useful in directing competitive marketing programs, nor in prioritizing process improvement initiatives. The metrics of market value, on the other hand, have proven very effective as leading indicators of both revenue growth and market share. These metrics include:
- Value Models, which identify those factors that are critical-to-quality (CTQs), their relative importance, and market perspectives on the trade-off between quality and price;
- Competitive Value Matrices, which identify value performance gaps to be leveraged or fixed through improvements to people, products or services, and business processes;
- Customer Loyalty Matrices, which quantify the loyalty of your current customer base, potential threats to future loyalty, and the cost of poor quality; and
- Competitor Vulnerability Matrices, which enable your sales force to target key vulnerabilities of specific competitors.
Of course, perspectives on value will differ from one market segment to another for each of your products or services, so it’s also very important that you define the market segments that are most important to the future of your business. And that leads us to a second imperative:
Modify the Tools of DMAIC to Achieve a Market Focus
Simply put, the traditional DMAIC entails:
Define the project:
- What is the problem and how does it relate to customers?
Measure the current situation:
- Where are we today?
Analyze to identify causes:
- What is causing the defects and variation?
Improve by implementing solutions:
- What data-driven solutions will minimize the variation?
- How will the gains be maintained?
In order to shift from an internal perspective on process improvement (Voice of the Business) to an external perspective (Voice of the Market), you’ll need to modify the way you approach the DMAIC methodology, to wit:
Define the targeted product/market:
- What are the most important products/services you provide and who are the customers who buy them?
Measure how that market segment defines value:
- What is the quality/price trade-off and what are the CTQs?
Analyze your competitive value proposition:
- What are your value performance gaps?
Improve value performance on key CTQs:
- Which performance gaps can be leveraged? Which must be fixed?
Control customer defect(ion)s:
- How does the market react to improvements?
This modification of the DMAIC methodology will bring the Voice of the Market into the identification of process improvement priorities while maintaining the quantitative rigor associated with both Lean and Six Sigma. The final step is to tear down the functional silos that exist in most business organizations:
Historically, process improvement initiatives have been spearheaded by Operations, with an emphasis on cost reductions and efficiency. At the same time, the role of Marketing has been to bring a customer perspective into the organization, and to use the traditional marketing tools associated with Product, Price, Promotion, and Place (the 4 Ps) in order to better meet customer needs. It’s now time for the Marketing function to add a fifth P to its toolkit (Process), and to capitalize on the expertise previously developed in Operations using the tools of Lean, Six Sigma, and other Business Process Excellence methodologies.
Moreover, in order for Operations to evolve from a narrow focus on cost reductions to the broader mandate for revenue generation and increased market share, the folks in Operations will need to draw upon the expertise of the Marketing function in order to bring the Voice of the Market to bear upon Business Process Excellence initiatives. This will require a new framework — one that is market-focused and value-based; one that uses a single voice, the Voice of the Market, to drive both competitive business strategies and process improvement initiatives. This unifying voice is what will make your BPE deployments an explicit outgrowth of your competitive marketing strategies, yielding more significant returns on your BPE investments. (Click on image to enlarge.)
Your Path Forward: A Self-Audit
As you consider the path forward for your organization, you might consider the following questions:
- Have you already picked most of the low-hanging fruit in your organization in terms of increased efficiencies? How do you know that further cost reductions won’t negatively impact your capacity to create and deliver superior value?
- Are you under increasing pressure to redirect your process improvement initiatives toward increasing revenues or market share?
- To what extent are you currently using either the Voice of the Customer (VOC) or the Voice of the Market (VOM) to identify your process improvement priorities?
- Is your VOC or VOM data being acquired from your targeted market segments? Or does it simply consist of averages across all your market segments?
- Does your market research clearly identify CTQs from a market perspective? Does it rank order their importance?
- Are you able to explicitly link market-defined CTQs to the business processes that have the greatest impact on them?
- Can you identify the specific business strategies that are driving your Business Process Excellence initiatives?