First: Define Value

A couple of days ago, in “The First Steps of The Lean Journey,” I said that there really is no first step, only the next step from where ever you are right now.

I admit that I left out a big assumption there – that you know where you are trying to go.

More specifically, that you really know the value you create.

Bas Mathijsen has posed the question here on The Whiteboard, as well as in a post in the LEI Forums where asks (paraphrasing) “Who defines customer value?” and “What is customer value?”

Good questions, and we don’t spend enough time there.
I have seen a lot of “improvement” effort dissipated because there was no clear idea of what the process was supposed to actually deliver.

As obvious as it seems, customer value is defined by no one but the customer. The transaction need not be monetary, or even commercial. A volunteer for a non-profit organization gives up time (and possibly money) and gets something in exchange. Usually that is some level of emotional satisfaction. A nonprofit that needs to attract volunteers needs to be conscious of this.

Since it is subjective, different customers are going to define “value” in different ways. Dan Sullivan once put it really well with this analogy (paraphrasing):

My neighbor has a really nice lawn. When he buys a lawnmower, he is interested in features like evenly cutting, ease of starting, how well it manages the clippings. But maybe I am looking for different things in a lawnmower. Maybe I hate mowing the lawn. I might be looking for a lawnmower that cuts the grass just below the roots.

Clearly these customers define “value” in different ways.

The other factor to keep in mind is that this isn’t a black-and-white thing. The value the customer finds in your product or service can be enhanced or diminished by an almost infinite matrix of circumstances. These include the magnitude of the (customer’s) problem you are solving, the degree of emotional satisfaction that is gained from your product or service, how easy (or aggravating) your sales and customer support processes are, the customer’s perception of your quality and a host of other intangibles. All of these translate into what (if anything!) the customer is willing to part with to get your product or service. Indeed, we have all heard of things that couldn’t be given away, or that had negative value.

The only real way to know what the customer truly values is to be the customer. This great little piece by Dan Markovitz on Evolving Excellence clearly shows how not to do it. Read the article, then do the opposite.

So, the customer defines what is valuable to him. What does the company do?

The company has to take their best information about customer value and translate it into specifications for the product and service they are going to provide. QFD is one formal way (though not the only way) to do this. Ultimately that becomes the product design. It is now up to production to actually deliver it at the target cost.

All well and good. Where this comes apart is (as always) at the seams.

Marketing and engineering “know best” and provide the “voice of the customer” when the customer actually isn’t even in the room.

The product may be specified, but the details aren’t worked through. There is only the most casual system to ensure that what is specified is actually what is built and delivered. Do you have a specified go/no-go outcome defined for each intermediate step in your process? Does that go beyond the product, and into the conditions required for success?

Delivery dates are given in terms of a range of time. In the USA the “cable guy” is famous for telling you he’ll be there between 9:00am and 4:00pm. We all laugh at how aggravating that is. But then think nothing of quoting “4-8 weeks” for a delivery window. WHEN is it supposed to be there?

Is your product support “leave it on the doorstep and run?” Do you follow-up with the customers and see what is, and is not, meeting their expectations? Do you solicit complaints (not simply collect them)?

All of these actions (or lack of them) will diminish your customer’s perception of value. Reputation and brand can carry past some transgressions, especially if there is really good follow-up. But even a 100 year old brand can be damaged, and the company is likely the last to know (not for want of clear signals).

The first step is “define value” but, to be clear, that means understanding what each and every step is doing to provide value to the next step in a long chain that both begins, and ends, with the customer.

4 thoughts to “First: Define Value”

  1. Mark,

    Many thanks for the shout out for my piece at Evolving Excellence. And kudos on this piece as well: a lucid argument reminding us that before we get to the tools, we should know what customers actually want from us.

  2. 1. Changes the form, fit or function of the product or service
    2. Customer willing to pay for it
    3. Done right the first time

    Fulfill all 3 and you have a value added activity.

    Miss on just one, and you should look to the 7 types of waste from there.

    1. Taking a more sophisticated view, though, there are many things the customer expects that they are not willing to pay for.

      As products and services move upmarket in a non-trivial marketplace, features and services increase faster than prices.

      What was a premium feature today must be offered “free” tomorrow, because your competitor has figured out how to do it with a stronger cost structure.

      The other view is, rather than being product centric, to focus on what the customer is trying to get done.
      What is the job he is trying to do?

      “The customer doesn’t need a drill, he needs a hole.”

      So – I’d be careful with the standard mantras found in common lean training, as they tend to narrowly focus on production and delivery of an existing product or service, without questioning much about the actual experience of the customer.

  3. Mark – great post! I found it when doing a quick search for “customer value” to cite in a recent blog post of my own. I appreciate how you call out that value can be defined in many ways depending on the customer. I’m currently living in Japan and have been writing about what I’ve been learning about Lean and leadership from a Western vs Japanese perspective. As I just wrote about, I’ve found that culture certainly influences what some customers would consider “value” while others might consider the same thing “waste”. http://kbjanderson.com/life-in-japan-wrap-it-up-value-or-waste/

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