The focus of a Lean system is providing maximum value for the customer by producing the product the customer wants as efficiently as possible. (For more information see Innovation Insight #23, Increasing Efficiency and Effectiveness Through Lean.)
John Seddon, in Freedom from Command and Control: Rethinking Management for Lean Service (2005, Productivity Press, New York, NY) points out that the above approach works in a manufacturing situation. In that case, an organization is producing a standard product with little or no variation. Even if the product is a car, there are a limited number of models and trim variations. Additionally, products or the components can be made and stored in advance.
On the other hand, in a service organization, the provider and the customer interact in the providing of the service. It cannot be provided in advance, and what the customer wants may vary with each contact. In this case, Seddon points out, the effective data to track is not simply how many customers are served and how quickly. Some customers are making contact for the first time, and the goal then is to meet their need as efficiently and quickly as possible. Other customers are returning because they were not satisfied the first time. Their contact is ‘rework’. Something was not provided as expected in the first contact, so there is a need to also track what Seddon calls ‘failure demand’. How many customers were not satisfied during their first contact? How can the failure demand be reduced?
This is the challenge in applying Lean to service organizations. In manufacturing, reduction of variation within physical parts of a product can make it possible to streamline the process, reduce waste, increase efficiency and reduce cost and time. Measuring quantity produced and the time to produce a standard unit, with goals of increasing quantity and decreasing time, makes sense. However,in service organizations specialized training and focus, coupled with measures like these, can be counterproductive. Training and directing service providers to focus on specific services can lead to multiple transfers to meet a customer’s need, rather than the person having the first contact with a customer being able to deliver value and prevent or resolve failure. This specialized referral system results in a less efficient system and dissatisfied customers. At the same time the service provider is meeting their goal of quickly providing service in their area of expertise. As Seddon reminds the reader, you get what you measure and reward.
So what is the solution for a service organization? To address this, Seddon suggests a systemic approach, with the goal of meeting all customer needs at the first point of contact effectively and efficiently, ‘one stop shopping’. Measures should be based on flow, the delivery of a service from start to finish, rather than on fragmented individual activities involved in providing that service. Design the provision of the service and plan training based on the actual demand of those being served, not on specific functions or products.
Seddon called this the ‘Vanguard’ model. First, identify the purpose of the organization from the customer’s perspective. Then determine the type and frequency of customer demands on the organization. Third, for high-frequency demands, determine what the organization is capable of providing – can it meet the demand? Then analyze the work flow to separate the activities that add value from non-value producing activities and see how the system can be changed to reduce the time and resources spent on non-value producing activities.