Before You Buy That New iGadget

Recent promos for the latest new technology gave me pause. And it should give you pause, too.

There is no doubt that we are a society of “must-have-the-latest-new-toy,” but have you thought about what happens to your old technology – those smartphones, laptops, printers, and other energy-emitting devices that you no longer wish to use? What is your old technology doing to Mother Earth?

You might say that you are responsible and recycle your old electronics. Good for you. And I bet many recycling depots do a decent job of ensuring safe recycling practices. But some old electronics may fall through the cracks.

In August 2009, CBS revealed some startling evidence (as only 60 Minutes can!) about old electronics being shipped illegally to countries like China where the dismantling of the equipment is hurting (understatement) the people and the environment. You can see the show here: http://www.cbsnews.com/videos/the-wasteland-50076351/.

If the 60 Minutes investigation does not give you pause, perhaps the following might.  

A report by Liam Young and Kate Davies of the Unknown Fields Division traces the supply chain of the global economy in reverse. Their research brings the point home (literally).

After the 60 Minutes expose aired, the Chinese government tried to clean-up Guiyu’s booming e-waste operation. However, Young and Davies state “that what really happened is that it went underground – or more specifically, inside.”

“Actually what happened is that the industry has moved from the street and into peoples’ houses,” he says. “So now this new form of mining is now a domestic industry, where a circuit board bubbles away to refine the copper next to a pot of noodles in someone’s kitchen.”

“It’s too easy for people to sit in an air conditioned flat in New York or London, tweeting on laptops and talking on their phones about the horrors of the rare earth mining industry or cheap production and exploitative labor in China,” Young says.

The reality is much worse.

Young and Davies collected some of the toxic mud created from recycled technology and created “lovely” toxic sludge vases. These vases are part of an exhibit at the Victoria & Albert Museum in London which opened on April 22, 2015.

Kelsey Campbell-Dollaghan summarizes the journey of the vases in a report titled “These Vases are Actually Made From Liquefied Smartphone ByProducts.” Here’s an excerpt:

“The mud that makes up each of these vessels was carefully drawn from a toxic lake in Inner Mongolia, where the sludge from the world’s most prolific Rare Earth Element refineries ends up. It was brought to London, where a ceramicist in a hazmat suit worked to turn it into actual pottery, representing the waste created by a smartphone, a featherweight laptop, and a car battery. Starting today at the Victoria & Albert Museum’s exhibit What Is Luxury?, you’ll be able to see each vase in person—a stark visualization of exactly what’s involved in building your electronics.”

After reading Campbell-Dollaghan’s report, I learned that our smartphones each have about 380 grams of toxic and radioactive waste. Think about that the next time you go to answer or make a call on your smartphone.

The questions before us are simple: 

  1. How much newer-better-luxury stuff do we really need?
  2. At what point will manufacturers take responsibility for killing the planet?
  3. What can be done now to reverse the damage?

The answers to the questions are probably not as simple.

The Competitive Edge

What’s your competitive edge? What makes you or your business the “one” to beat?

If you’re like most businesses, you probably say that you’re good at what you do or that you’re better than anyone else in your craft. That’s all well and good, but why should clients care?

Here’s the thing:  Clients don’t actually care about you or your business. They only care about themselves and what you or your business can do for them. This makes sense, since clients want as much value as they can get, but they don’t typically care where they get it.  

What can you or your organization do to position yourselves to be the best? Here are four considerations: 

  1. Cost. Reducing operating costs will provide you with a competitive advantage in the marketplace. Relentlessly pursue the removal of all waste in your organization to reduce operating costs. Look at the entire cost structure of your organization for all potential cost-reduction areas. And don’t forget to pursue Lean production in all you do.
  2. Speed. Make sure you are able to deliver on your promises quickly and by no later than promised due dates. You can improve speed of delivery by improving your organization’s communications capabilities (think:  Technology) and using equipment that is reliable and right for the job. Ensure you have knowledgeable workers to assist with your projects. Also, use just-in-time production to reduce inventories and reduce risk.
  3. Quality. While some companies employ quality as a reaction to the marketplace, to compete on quality means that you and your organization use it to please the customer and not just a way to avoid problems. Since quality is different for each customer, you and your organization need to understand your customers’ needs, wants and requirements, so that you can translate them into exact specifications for the customers’ desired goods and services.
  4. Flexibility. Competing on flexibility means that your organization is able to adjust to changes in the marketplace relating to its product mix, volume or design. This means being able to produce a variety of goods or services within the same facility to meet customized requests. Multi-skilled workers and excess capacity in the business can help an organization compete on flexibility. 

Most organizations should start positioning themselves in the market by focusing first on quality. Once quality is perfected, then focus on speed of delivery, then cost-cutting in operations and, finally on flexibility. 

If your organization is not as competitive as you believe it should be, improving on all of the above competitive advantages may be in order. You will find that as you become more competitive, you will reach a point where a trade-off will be required between being better in one or another area. This will ultimately set you apart from your competition.

Off Target

When Target came to Canada in 2011, not only were consumers surprised that the retailer opened up over one hundred stores across the country, but so was the business community. To do such a “big bang” approach, you either know what you’re doing or you’re taking a major risk. Unfortunately for Target, its major risk did not pay off.

Target’s biggest failing was in not piloting its entry to Canada with one or two stores before launching full scale. Any project manager worth their trade will tell you that starting small and building up when it makes sense to do so is the best guarantee of success.

In addition to missing the mark with their full-scale roll-out across Canada, Target missed out on the basics of operations management. For one thing, their demand forecasting appears to have been a dismal failure. If they had forecast properly, they would have learned that Canadians preferred the U.S.-type Target stores and not reincarnations of Zellers.

Target also missed out on strategic capacity planning as well as facility layout design. Their inventory systems management was absent, to say the least. This also speaks to their lack of adequate supply chain management. When inventory is scant (as it was at Canadian Target stores), one might reasonably presume that the retailer was using some type of customized just-in-time fulfillment. However, this, too, appears to not have been part of Target’s strategy.

A material requirements planning or enterprise resource planning software would have helped Target manage its stocks and stores. However, we can see that even if Target had such a system, it, too, failed them.

And what about quality? Quality and price are generally prominent factors for consumers. Integrating quality into every element of an operation allows an organization to reduce its prices while still remaining profitable. Clearly, quality does not appear to have been a high priority for Target.

While one can hypothesize about Target’s demise in Canada, it provides little comfort to Target employees. As well, the company itself is now targeted (pardon the pun) as a losing venture:  At least, in Canada.

One thing is certain, though: Target really did miss its mark!

The Lightness of Black Friday

According to Kevin Roose of the Daily Intelligencer, Black Friday is “a nationwide experiment in consumer irrationality, dressed up as a cheerful holiday add-on.”

It’s hard to disagree with Kevin’s assertion!

The problem with Black Friday is not so much the consumer irrationality (although that really should be a concern for society!); it is more about how suppliers both anticipate and succeed in increasing their inventory turnover by taking advantage of the irrational consumer. Is that such a bad thing?

I think it is and here’s why – first, sales days like Black Friday evoke erratic behavior and, second, these types of frenzied sales force consumerism to take a back seat.

Black Friday sales are not necessarily big sales, but they are a super opportunity for suppliers to unload their burgeoning warehouses. This speaks to poor management of inventory and too much inventory, at its core, implies (and typically masks) big management issues with the company.

Excess inventory may mean that a company is placing inaccurate inventory orders. When this happens, the company holds more inventory than the market demands. That’s why sales like Black Friday are a welcome opportunity to unload the excess, even if it is at a discounted price.

Too much inventory creates other problems for the company, as well. For instance, too much inventory takes up valuable floor and shelf space. If the item does not sell quickly, then other more valuable inventory does not make it to the shelf. This is a double whammy, so-to-speak. Not only is the poorly moving inventory not selling, but neither is the good inventory.

And when companies aren’t able to sell their inventory, this hurts their bottom line. Black Fridays and other types of sales days provide an opportunity for the retailer to drastically cut costs to sell its inventory – even if the sale is a net loss.

A major concern for companies is not only the space taken up by slow-moving inventory, but the associated carrying costs. These costs are typically about 30 percent of the value of total inventory. For instance, if the value of all television sets at your favourite store is about $1 million, then the cost to the company to carry (store) that inventory is another $300,000 on top of that. Carrying costs include things like rent, utilities and labour.

And let’s not forget about waste. In a worst-case scenario (and we know that this happens more often than not – even in Victoria!), companies throw out their excess inventory. This is why it is so critical for companies to ensure that their inventory turnover is high – to reduce carrying costs and waste – both of which cut into profits.

Ultimately, the question we should be asking is:  “Why do we need so much stuff?” And, why do suppliers need to meet this demand?

It’s true that consumers drive demand, but it should be a corporate social responsibility on all suppliers – from the acquisition of raw materials to the end seller – to help everyone curb excess. But who will start first? Will it be the consumer who refuses to engage in sales like Black Friday; thereby not helping companies move their inventory? Or will it be the smart supplier who decides to stop stocking whatever the consumer wants (and, therefore, risks going out of business)? It’s a difficult question indeed.

For my part, I bought a new iPhone today. Who do I blame? Me for buying a product that I did not need? Or the store that stocked it and enticed me with a good price?

Service – Now!

When you’re in line waiting for service, how long is too long?

Studies show that on average, waiting more than three minutes is too long. And customers that wait more than three minutes? There is a strong likelihood that they are dealing with the only available service provider. If customers have choices, they will leave.

This is not good news for providers of service.

How good is your company at providing top-notch customer service? STELLAservice, an online customer service rating company, found that DisneyStore.com ranked among the top ten for both speediest e-mail support (1 hour, 47 minutes, 40 seconds) and phone support (12 seconds). For the full survey, click here.

In addition to speed (or time), customers are also looking for the following qualities in service (source: Evans and Lindsay, The Management and Control of Quality).

  1. Timeliness. Is the service completed on time? For example, is an overnight package delivered overnight?
  2. Completeness. Is everything the customer asked for provided? For example, is a mail order from a catalog company complete when delivered?
  3. Courtesy. How are customers treated by employees? For example, are catalog phone operators at Sears nice and are their voices pleasant?
  4. Consistency. Is the same level of service provided to each customer each time? For example, is your newspaper delivered on time every morning?
  5. Accessibility and convenience. How easy is it to obtain the service? For example, when you call Sears, does the service representative answer quickly?
  6. Accuracy. Is the service preformed right every time? For example, is your bank or credit card statement correct every month?
  7. Responsiveness. How well does the company react to unusual situations (which can happen frequently in a service company)? For example, how well is a telephone operator at Sears able to respond to a customer’s questions about a catalog item not fully described in the catalog?

When working with customers, service providers are in a more precarious situation than are producers of manufactured goods. Because service can be intangible (unlike a product or good that is tangible), it is sometimes hard to know a customer’s expectations. A service’s “fitness for use” is often in the eyes of the customer.

By building quality into every dimension of service, organizations will not only attain excellence in service, but happy and loyal customers – and a healthy bottom line.

Six Steps for Achieving Quality

We all intuitively understand quality. It’s that “something” that makes us appreciates a product or service; but describing that “something” can be difficult. 

From a customer’s perspective, quality is what the customer is willing to pay for. From the organization’s perspective, quality relates to a product’s or service’s conformance to specifications. And these specifications are not only according to what the organization prescribes, but they also relate to the customer’s expectations. 

Organizations that spend money on achieving quality systems and programs are, in the end, more profitable than those that do not. This is because quality management programs not only prevent poor-quality products or services from reaching the customer, but they also continuously improve on existing quality practices to ensure that products and services are done right the first time.

Here are six steps (adapted from Operations Management by Nigel Slack, et al) to help you or your organization produce a quality product or service.

  1. Define the quality characteristics of the product or service. These characteristics will be different for every type of product or service, depending on the industry. For instance, you may be evaluating on functionality (how well the product or service does its job), appearance (sensory characteristics), reliability (consistency of performance), durability, or some other quality.
  2. Decide how to measure each quality characteristic. Depending on the quality characteristics, how will you measure functionality, for example, a restaurant, airline, bank, or computer? What characteristics of appearance are quality characteristics? What about reliability? And so on.  
  3. Set quality standards for each quality characteristic. This is the level of quality that defines the boundary between acceptable and unacceptable. This can be difficult. For example, if one restaurant customer out of every 1,000 complains about the food, does that mean the other 999 are satisfied and, therefore, quality is good? Or are there other equally unhappy customers who did not complain? If this level of complaint is similar for other restaurants, do we regard this as satisfactory quality?
  4. Control quality against those standards. When standards are set, the organization needs to check its product’s or service’s conformance to those standards. This means that product or service delivery is “done right the first time every time.” As part of this control, the organization needs to decide where in the process that checks should occur, whether every product or service should be checked (or should checking be confined to sampling), and how the checks should be performed.
  5. Find and correct causes of poor quality. Implement total quality management tools and techniques to find and correct poor quality.
  6. Continue to make improvements. As with step 5 above, total quality management tools and techniques will help the organization cut its costs of poor quality and improve overall quality.

As your organization implements quality programs, remember to include employees in all quality improvement initiatives. If your employees are not happy, there is a strong likelihood that your customers are also not happy (even if customers are not complaining – see note under Step 3 above).  

Consider this evidence compiled by the British Quality Foundation:  About 68 percent of customers will stop doing business if they perceive an attitude of indifference from your staff. However, only 14 percent will leave if they are dissatisfied with your product or service, while nine percent leave for competitive reasons.

Include your employees in all quality programs for a healthy work environment and bottom line.

Types of Clients

Let’s face it. There are clients and then there are clients. The great clients (or customers) are those that are ready, willing, and able to work with experts to achieve organizational efficiencies.

And then there are clients who fall short on anything from initial meeting to following through with an expert’s recommendations – these latter clients are wasting not only the expert’s time, but their own, as well.

As experts in our various fields of work, we have all run into a variety of clients. Here are some of the more common types – if you’re a client, maybe you see yourself in one or more of these descriptions: 

Bargainers. These clients want everything you’re proposing, but they can’t pay for it. Or maybe they’re doing the project “under the table,” and don’t want to ask the “real boss” to pay for it. Solution: If the client does not have the money for the full project scope, downgrade the scope – phase the project into manageable chunks.

Naysayers. These clients just can’t believe the project will take six months to complete. Certainly they can do it in a fraction of the time. Solution: Explain why the project will take as long as it will (perhaps a timeline depicting steps is helpful here); if the client does not believe you, suggest a mix of internal and external resources to complete the project faster. Client is still a non-believer? Walk away.

Stealth Implementers. They insist that no one else from their organization needs to be involved in the project. Just do it. Solution: Stress (and demonstrate with examples) how involving others in the organization will greatly enhance the success of this project as well as change management when implementation occurs. 

Self-Made Experts. These clients believe they can do exactly what you’re proposing without you, so why are you charging them so much? Why don’t you just tell them the steps that you would take and then leave them to it? Solution: Walk away.

Call 9-1-1. These clients think everything is an emergency. They need your proposal “yesterday” and the work is required within the next month. However, when you give them your proposal, you don’t hear from them for six weeks. Solution: Develop a project timetable and meet each deadline. Build in “slack” time for all steps involving client input.

Weekend Schmeekend. This is the client that sends you e-mail at all hours of the day and night. Weekends are for working. There is no such thing as work-life balance. Solution: Say no when appropriate. Just because the client works all hours does not mean everyone else needs to, as well!

Committee Monger. The client who believes everything needs to be decided by committee. The end result? Everything gets decided by committee, no one takes responsibility for decisions, and decisions take much longer. Solution: Ensure that there is one “point” person (typically a Project Champion) that will sign-off on all deliverables.

Wordsmithers. You know the ones that review your work and almost re-write the entire content? Solution: Set a time limit for review and stress that only key content requires review. Provide an example. Or hand out the report ahead of time and then convene as a group to review the feedback.

In the end, it’s up to the expert to determine whether they are able to work with the client. If the decision is to fire the client, provide them with the name of another expert – even if it is a competitor. You’ll be glad you did!

Value and Billable Hours

Why do companies and individuals still insist on billing for services “by the hour?” If you are tracking billable hours, you are not being efficient. And, even worse, you are not providing the best possible service to your customers.

When companies focus on billable hours, it may be to the exclusion of other important activities, like building capacity to better serve customers.  

However, this is a Catch-22 situation:  As you build capacity to better serve your customers, you are not able to bill for your time. Then when you use this new capacity to serve customers, you discover that it takes you less time to provide the same service. If you are billing by the hour and you are very efficient, you are unable to earn as much as someone who is less efficient providing the same service.

This is why billing based on the value of service being provided makes so much more sense. Why wouldn’t your customer want to pay you the same (or more) for a service that you can deliver in less time?  

According to Canadian statistics, the amount of time spent at work is decreasing. This is also the case in the United States. Does this mean that “billing-by-the-hour companies” are earning less? Perhaps, but it might be that these same companies are realizing that it is more economical (and profitable) to bill for value rather than hours. 

The secret to creating value for both parties (the company or person providing the service and the company or person receiving the service) is to focus on outcomes rather than inputs. How much time it takes to create a widget or develop a plan is irrelevant to the value the widget or plan provides to the customer.  

In Lean Six Sigma terms, we want to go beyond just meeting our customer’s needs and wants – we want to be sure our customer is delighted with the product or service they purchase from us. This is value. And it has nothing to do with money.

If customers are delighted with the service provided by your staff, they will pay your asking price to continue to receive this value. It is irrelevant to the delighted customer that it cost you $100 to produce the widget, but they pay you $1,000 for the same widget.

In addition, fixed fees (i.e., value-based fees) have the advantage of using up less administrative time for both sides. There is no need to track hours unless the provider of the service wishes to do so. This improves efficiency for both sides.

In the words of Alan Weiss, “No one cares, really, about how good you are. Clients care about how good they are going to be when you’re done with them.”  And that, really, is the ultimate goal of any service or product.

 

Government Spending: A Cause of Inefficiency

We often hear that government is inefficient:  They spend too much, they take too much time to provide services, they do not provide quality services, they have too many checkpoints, and so on. But who or what is government? Are employees not the heart of any organization?

Contrary to popular belief, employee performance is not the problem when it comes to efficiency. There are many very industrious and efficient employees in any industry, including government.

The root of inefficiency in government relates to money. More specifically, because governments do not spend their own money, inefficiency can be a serious problem.

To put this into perspective, think about these four possible scenarios relating to spending money (source: Milton Friedman, Free to Choose) (a matrix is also provided):

  1. You spend your own money on yourself. When you spend your own money on yourself, you take care with your money, trying to get the best deal (best quality for least cost).
  2. You spend your own money on somebody else. When you spend your money on somebody else, you still take care to spend the least amount of money, but you are not as concerned about the quality of the product or service. For example: buying gifts for someone else.
  3. You spend somebody else’s money on yourself. When you spend somebody else’s money on yourself, your primary concern is to get the best quality. Money really is no object. For example: buying yourself a gift or enjoying dinner on “somebody else’s dime.”
  4. You spend somebody else’s money on somebody else. When you have somebody else’s money to spend on others, concern for quantity of spending and quality of product and service is not a high consideration. This is the situation with government spending.

Now put yourself in government’s shoes. If you have an almost unlimited supply of someone else’s (i.e., taxpayer) money each year, how will you spend it? Will you really give your systems and processes the due care that you would if you were spending your own money?

Unlike private organizations that spend money on goods and services that the market values, government spending has no information value. That is, organizations that spend to meet market demand will create a profit – this is the value that the organization generates. If it stops generating value for its customers, it stops making money.

In government, no matter how much money is spent and no matter how much output is produced, government does not know the value of its output. This contributes to a cycle of inefficiency in spending and outputs.

When was the last time your government told you how well they spent your money?

While pockets of government departments do forge ahead with implementing efficiency measures, there is generally no check on government efficiency. Governments are inefficient because they can be.

Value: Defined

Lots of people are talking about value these days – especially in light of Lean culture.

The Merriam-Webster dictionary provides eight definitions for “value.” The definitions relate to market price, luminosity, and denomination. From a business perspective, value is related to market price and the customer’s perception of a fair return on an exchange.

From a Lean perspective, value is anything that the customer is willing to pay for – as long as it meets these three criteria:

  1. The customer cares about it.
  2. The product or service must be physically transformed or the step toward transformation must be an essential prerequisite for another step.
  3. The product or service is delivered “right the first time.”

“Non-Lean” organizations sometimes have a tough time determining what it is that their customers’ value. But determining value is actually not that difficult. It comes down to ensuring that the above three criteria are met – all the time. Look at it this way:

  • An organization with efficient processes is able to keep its costs down. This results in a greater ability to attract more customers and translates to value for the customer.
  • An organization with inefficient processes incurs higher production costs. These costs get transferred to the customer. The customer does not see this as value.

Inefficiency can be a business killer. This is where Lean organizations have an edge over non-Lean organizations.

Lean cultures enable waste reduction in business processes that directly contribute to value for the customer. Lean cultures help businesses thrive.

If your customer values your product or services, they will pay your asking price. If your offering does not meet your customers’ criteria for value, the customer may still pay for it, but will definitely be shopping around next time they want the same thing.

Next time you complete a transaction with your customer, ask them to rate the value that they just received from you. Their response will tell you how well you are actually doing compared to how well you think you’re doing. Consider it a reality check.

Value is the key to organizational survival. If an organization consistently delivers poor value to its customers, it goes out of business. It’s that simple.