Chapter
3
Levers for Becoming More
Real Time—A Product/Service
Life-Path Perspective
Dell rose from a dorm-room start-up to a global force during the 1990s as a PC maker. Michael Dell launched Dell Computer Corporation in 1984 with $1,000 and a few employees. By 1995, the company grew to more than seven thousand employees in fifteen countries with $3.5 billion in sales implementing a build-to-order direct sales model. This success validated Michael Dell’s belief that tailoring personal computers to user preferences would make Dell computers easier to use and troubleshoot. The company became known for its relatively affordable but high-quality PCs, reliable customer service, and strong customer relations. Although some other companies also offered build-to-order PCs at low prices, they were not considered comparable to Dell’s quality. Dell offered a large product variety specified by the customer with short assembly and delivery lead times. That was accompanied by reputable customer support and attractive prices. As a result, Dell competed effectively with much larger competitors in the personal computer market, including IBM, Apple, and Compaq.
These competing companies offered product lines that gave the consumer little product variety, had lead times of weeks or months due to backlogged orders, and were generally more expensive than the newer Dell platforms. Dell’s success was built on a mass customization strategy, incorporating the use of modular components, clever use of web-based configuration-to-order, efficient assembly, and just-in-time inventory management. This strategy allowed Dell to compete on high volumes, low cost, and speedy delivery and still offer a quality product with reasonable variety and reputable customer support.20
Dell made innovations in the following areas:
Product Design. Dell designed modular components that could be configured at the time of ordering into a customized product to meet individualized customer needs.
Product Orders. Dell designed a web-based interface where customers specified the configuration of modules that would meet their individual needs.
Production and Delivery. Products were built and delivered quickly to individual customer order specifications using efficient assembly, logistics, and just-in-time inventory management.
Product Use. Dell PCs were seen as high-quality, low-price PCs, designed to meet specific user preferences, and easy to use.
Service. Customer service was reliable. Support could be matched to the customer’s ordered PC, making it easier to troubleshoot problems.
In this example, a real-time effect occurs at each stage where Dell made innovations. In several of those stages, the amount of time the customer spent waiting on that stage was reduced. For example, the time to design a product to individual preferences was reduced because of the innovative modular product design; the time to service the product was reduced because the service representative knew what to expect from each computer. In some stages the real-time effect increased the quality of the time for customers. For example, the ordering process helped customers discover their specific computer needs.
Together, these stage-specific real-time experiences contributed to the customer’s overall real-time experience. Based on the positive effects across the various touchpoints, Dell customers maintained a more positive real-time experience when compared to the competition.
What may not be obvious is that a company can also affect stage-specific and overall real-time experiences through its activities that do not involve direct interactions between the customer and the product or company. In Dell’s case, the company’s innovation in product design that led to the modular components may not have involved direct interaction with the customer. Nevertheless, the results of Dell’s innovative product design activity could then be used by the customer to specify a customized PC. Dell’s innovative product design activity is an example of an indirect activity that contributes to real-time experiences by making it possible to reduce the amount of time or increase the quality of time spent in subsequent direct interactions between the customer and the company or product.
The stage-specific and overall real-time effects occurred not because of independent attempts to innovate at each stage but because of a coordinated effort to follow an overall business strategy across multiple stages of customer interaction. That strategy recognized the importance of meeting customer preferences on several criteria, including rapidly providing a customized, high-quality product at low cost. Dell experienced phenomenal growth from 1984 to 1995, going from a start-up to a $3.5 billion company.
A portion of Dell’s success can be attributed to its ability to tangibly demonstrate that it valued customer time better than competitors did. Leaders in a company aspiring to emulate Dell’s success will be facing a different set of competitors as they look to innovate in a way that best provides value for its customers. An obvious question for leaders to ask is, “Where should we look to innovate?”
Where to Look to Innovate: A Product/Service Life-Path Perspective
Monitoring customer real-time experiences involves mapping their interactions to the company’s organizational processes and collecting data on those interactions. Such a map serves to identify strengths and weaknesses, thereby providing a valuable tool to prioritize areas for potential real-time improvement. Potential areas for improvement must first be mapped to specific innovations that promise to realize the needed improvements. The goal of any proposed real-time improvement should be to demonstrate that the organization values customer time more effectively than competitors do. The measure of the innovation’s success (or lack of success) would be captured by the RTMR system. That measure should reflect the change in how the customer spends their valued time.
It is essential that the company adopt a methodical approach as it seeks to understand the time investment customers make when they choose to interact with the company. The approach adopted here focuses on the steps in the life of a product or service (see Figure 3.1). These steps include customer touchpoints as well as processes that do not directly touch customers but have an effect on their real-time experiences. These steps occur along the life path of a product or service, beginning with the initial steps in creating a product or service. They continue through the steps that produce the product or provide the service. Furthermore, they extend to steps in the ongoing use of a product or service as well as steps that go beyond that until its end of life.
Many organizational leaders will find that the steps in the life of a product or service provide a suitable framework to understand and measure customer interactions. For others, a different framework may be more suitable (for example, one that is more sales/marketing focused). Whichever framework is selected, it is imperative that the structure provide a rigorous and structured means to uncover potential areas where innovative changes might be made to demonstrate that the organization values customer time more effectively than its competitors.
Figure 3.1 illustrates multiple touchpoints where customers interact with the company and its product or service. The most obvious touchpoints occur during usage, but some companies may choose to involve customers beginning at product inception and continuing throughout the life of the product or service. When investigating places to innovate, an organization should consider improvements to any process that changes a customer’s real-time experiences. Small improvements to processes that are frequently experienced can provide significant value improvements for the customer. Similarly, modest improvements at a time when customers consider their time value heightened can also create positive valuation improvements.
Figure 3.1 Steps in the Life of a Product or Service
The examples below illustrate innovations along the life path of a product or service. The examples start with innovations occurring at the bottom right of Figure 3.1 and move up and to the left. Some examples illustrate innovations that occur at a step that directly involves interaction with customers. Others indirectly affect customer real-time experiences.
Clothing manufacturers, smartphone providers, hair dryer producers, train manufacturers and operators, and many other organizations are innovating to make their products and services faster. That demonstrates that they value customer time more effectively than their competitors do. The innovations noted here, like many others, not only address speed but other criteria as well, including increasing sustainability, reducing product downtime, reducing risk during use, and improving experience quality. These additional criteria reinforce the recognition that both the amount of time customers spend using a product or service and the quality of that time investment are important. Improvements to both can be leveraged to demonstrate an organization’s respect for customer time.
Figure 3.1 also serves to illustrate that companies can demonstrate customer value by process innovations that involve production and delivery of a product or service. These places to innovate may or may not include a touchpoint where the company and customer directly interact. Included in the steps of producing a product or a service are the processes that involve interactions between the company and its suppliers. Although these processes may be untouched by customers, they remain areas where a company may want to innovate. That is particularly the case when these processes affect the company’s ability to compete more effectively on the quantity or quality of time experienced by customers in later steps in the life of a product or service.
Production Innovation: OSRAM and Bosch26
Most manufacturers build products utilizing production equipment where the output from one manufacturing device feeds another device throughout the production floor. OSRAM, based in Munich, is a global lighting manufacturer with many such production devices. OSRAM worked with Bosch, which has expertise in connectivity, to develop a production innovation called the OSRAM Ticket Manager (OTM) with a number of requirements, including these:
A smart central system to replace personal handling of individual machines
A process that assesses and documents the condition of all machines
A way to assign maintenance and repair tasks
Connecting over eighty different machines at OSRAM’s Berlin location, OTM supports employees by taking streams of data from different production devices and processing them into useful information. Workers now simply consult a mobile app for a status report on the factory’s machines. Maintenance tasks can be efficiently scheduled, and a clear overview of any upcoming tasks can be planned and coordinated.
OSRAM looked at its production process as an innovation opportunity. The company understood that it could achieve traditional goals of increasing productivity and quality by managing the factory as a system rather than managing each individual machine separately. Although OSRAM’s innovation does not include any direct touchpoints for the customer, the automation program allowed the factory to become more agile, thereby allowing OSRAM to be more responsive to changing customer needs. Furthermore, increases in quality mean customers spend less time seeking support after a purchase. Organizations that intentionally focus on understanding customer real-time experiences across all the steps in the life of a product or service are more likely to identify and implement the most impactful innovations. This benefit can only be realized if the innovation evaluation process considers the larger context, which includes both processes with and without direct customer touchpoints.
These two examples show that faster is better, but it is speed in support of the customer’s understanding of quality that matters. For example, at OSRAM it is speed in the production process while still assuring product quality. At Datex, it is speed in the delivery process while still managing associated risks, such as assuring that the right product is delivered undamaged. The real-time experience of a customer who is served quickly but without accuracy or respect might achieve an improved immediate response time. However, forcing the customer to endure a less-than-satisfying interaction or invest additional time to address the inaccuracy undermines the speed. A customer might be delighted to learn that an order has been filled quickly, but the relationship with the company can quickly sour once the customer discovers the order has not been properly filled. Leaders must strive to ensure that a company’s innovations lead to customers perceiving that the organization values their time more effectively than the competition.
Figure 3.1 also illustrates that real-time innovations can take place during the product or service development process. The development process includes the product/service design, development, and testing processes. Depending on the development philosophy adopted by a company, these steps (and any associated sub-steps) could include direct customer touchpoints that impact the real-time nature of the company, or these steps may be more indirect real-time processes. Indirect real-time process improvements are not immediately visible to the customer, but they have a customer-visible impact via steps later in the life of a product or service. Thus, these processes are potential places to make innovative changes that demonstrate a company’s respect for the value of their customers’ time. Decisions made here will have significant effects on subsequent steps that directly affect customer real-time experiences.
Implications for the RTMR System
The RTMR system provides a map of the customer’s real-time experiences over the life of a company’s products and services. It should also provide a comparable map for the competition. These customer experiences will change over time as customers, the organization, and competitors evolve. As a result, the data in the RTMR system has to be maintained through an active monitoring system.
The customer experiences monitored in the RTMR system should be mapped to a company’s processes, thereby allowing the company to focus real-time improvement efforts on processes that drive maximal time benefit to the customer. Figure 3.1 illustrates a simplified set of processes in the life of a product or service that can be mapped and monitored in the RTMR system. An organization could choose to monitor more processes than those that involve customer interaction. Also monitoring processes that do not involve customer interaction should yield a more complete picture than monitoring just processes that involve customer interaction. As improvements are made to any monitored process, analysis of the RTMR system data will highlight the effectiveness of those efforts. Simultaneously, the RTMR system will highlight changing customer behaviors that could signal the need for a reprioritization of a company’s continuing improvement efforts. Analyzing a more complete set of processes will generate a richer analysis and interpretation of current status, problems, and opportunities required to demonstrate that a company values its customers’ time better than the competition.
In addition to innovating with products and services, various customer touchpoints, and other steps along the life paths of products and services, organizational leaders must consider the RTMR system itself as another major place to innovate. The RTMR system becomes a company’s innovation heart monitor. It measures performance against the competition and makes it possible to sense and respond to changing customer real-time expectations. Over time, the monitored information coming from customers will increase. Understanding of customer behavior will also increase. Steadily enhancing the data monitored by the RTMR system will increase the visibility of opportunities and challenges organizations face as they continually seek to improve their real-time performance.
Levers for Innovation
An organization’s appreciation for customers’ perceived investment of time comes from analysis of the data that the RTMR system collects. This analysis provides a data-driven definition of real time based on customer experiences. It permits the organization to explore innovation opportunities that can be selectively pursued as the organization seeks to increase the real-time value it provides its customers. Innovation opportunities can be found at each of the steps in the life of a product or service.
The most important levers for redefining and optimizing the manner in which a company competes in the marketplace will vary by company. Nevertheless, the potential core levers for specifying innovations at each step in the life of a product or service include the following:
Products or services. Example: A product’s operational features could be enhanced to increase its operational speed. Such an innovation program could begin by upgrading the product components provided by partners and suppliers.
Processes. Example: The processes for entering an order could be refined to make them faster and to include additional checks to reduce order errors. Such an innovation program could check product inventories for order fulfillment purposes. When inventories fall below acceptable levels, the revised process could automatically notify partners and suppliers.
Data. Example: Analytic processes could be initiated when established objectives are not being met. Such an innovation program could be triggered when targeted delivery times are missed. That could lead to the understanding that the factory is unable to maintain suitable inventory levels. That realization could lead to the identification of a specific machine that requires increased maintenance.
People. Example: A company decides to empower employees to open trouble tickets on behalf of customers. This empowerment provides incremental incentives for employees who act to solve problems before customers need to invest incremental time to resolve open issues. To implement this innovation, the company chooses to train employees in basic customer support techniques so that they view themselves as part of a support team that ensures that customer interactions are fast, error-free, and respectful.
Each of these core levers is described more fully in its own chapter to follow. Levers beyond the core levers are also described in a separate chapter. These additional levers include the product or service technology, culture, strategy, and relationships with suppliers, partners, and customers in the organization’s ecosystem.
Based on analysis of the data that a company collects via its RTMR system, organizational leaders and members of the RTMR system will identify a set of potential levers for changing customers’ real-time experiences. Use of a framework, such as the steps in the life of a product or service, guides the collection and analysis of data by the RTMR system. It helps assure that the total impact of a product or service on the customer’s perception of time, including both amount and quality, is considered. It also provides confidence that appropriate areas for innovation have been considered from beginning to end of the life of a product or service. This beginning-to-end perspective contributes to prioritizing alternative innovation programs.
Transforming an organization into a more effective real-time organization that will survive and thrive requires prioritizing and addressing prospective innovation programs based on available resources. Leaders understand that to compete effectively in the real-time revolution, improvement programs must be structured and managed to provide the largest customer benefits. Using the levers for innovation to transform the organization must demonstrate that the company values customer time more effectively than competitors do.
Key Takeaways
As an organizational leader, consider how to answer this important question: “To value customer time more effectively than the competition, where should we look to innovate?” The approach adopted here to help answer this question focuses on looking at the steps in the life of a product or service.
These steps begin with the initial steps in creating a product or service, such as designing, developing, and testing a product or service.
They continue through the steps that produce the product or provide the service, which also include ordering and delivering the product or service.
Furthermore, they extend to steps in the ongoing use of a product or service as well as steps that go beyond that, such as maintaining and disposing of a product or service at its end of life.
All of these steps involve processes that are potential places to make innovative changes that demonstrate a company’s respect for the value of customers’ time. Changes in processes earlier in the life of a product or service will affect later processes. Together, innovations at various steps in the life of a product or service affect customer real-time experiences.
The RTMR system should monitor customer experiences that occur at various steps in the life of an organization’s products and services. It would also be informative to monitor processes that do not involve direct customer interaction. Monitoring and analyzing a more complete set of processes will generate a richer analysis and interpretation of current status, problems, and opportunities required to demonstrate that a company values its customers’ time better than the competition.
Innovation opportunities can be found at each of the steps in the life of a product or service. The most important levers for innovation at each of these steps will vary by company. Potential core levers at each step, though, include products and services, processes, data, and people. In addition, leaders can consider using levers beyond the core levers to improve the value of customer time. These additional levers include changes to the product or service technology, culture, strategy, and relationships with various stakeholders. The core levers and those beyond the core are the subject of the next chapters. Singly or in concert, these levers provide the innovations that transform your organization into a more effective real-time organization.