Lean Consumption

A few months ago, Harvard Business Review published an article on “Lean Consumption” (purchase required) by James P. Womack and Daniel T. Jones, two of the leading champions of the concept of lean management (Strategy + Business recently did an interesting profile of them here - registration required). 

The HBR article is interesting, both for what it says and what it neglects to say.  It reflects a broader trend in business management to apply many of the same management techniques that have worked well in other business processes to customer relationship management.

The authors quickly present their key thesis:

Just as businesses around the world have embraced the principles of lean production to squeeze inefficiency out of manufacturing processes, these innovative companies are streamlining the processes of consuming.  In the early 1990’s we popularized the term lean production to describe the ultra-efficient process management of our examplar firm, Toyota.  We believe it is now time to recognize lean consumption as its necessary and inevitable complement.

To adopt the lean consumption view, we need to view consumption as a process, rather than as an event:

Think about consumption not as an isolated moment of decision about purchasing a specific product, but as a continuing process linking many goods and services to solve consumer problems.  . . . For producers and providers (whether employees, managers or entrepreneurs), developing lean consumption processes requires determining how to configure linked business activities, especially across firms, to meet customer needs without squandering their own – or the consumer’s – time, effort and resources.

The principles of lean consumption

Womack and Jones highlight six principles as the foundation of lean consumption:

1. Solve the customer’s problem completely by insuring that all the goods and services work, and work together.
2. Don’t waste the customer’s time.
3. Provide exactly what the customer wants.
4. Provide what’s wanted exactly where it’s wanted.
5. Provide what’s wanted where it’s wanted exactly when it’s wanted.
6. Continually aggregate solutions to reduce the customer’s time and hassle.

At one level, this seems like common sense. Of course, that is what businesses should have been doing all along. But I have spent enough time on customer support calls being reassured by an endlessly repeated tape that “your call is very important to us” and then finally connecting with someone who has no clue how to provide what I want, much less when or where I want it, to know that these principles are all too rarely applied in practice. There is certainly tremendous opportunity to apply the principles of lean consumption to improve customer satisfaction while at the same time enhancing the profitability of vendors.

Pay attention to relationships, not just processes

And yet, I had a growing sense as I read the article that Womack and Jones view the consumption process far too narrowly.  What if customers don’t know what they want? Much of the value in a customer relationship can come from helping customers to define their needs more clearly and then providing them with the tools to satisfy their own needs. To avoid thinking too narrowly about processes, it is important to pay attention to relationships.  Relationships are difficult to build – they are time consuming and often generate friction as the various parties seek mutual understanding and mutual benefit from the relationship. In their relentless focus on process efficiency, the authors may undermine the ability to build deeper relationships with customers.

Relationships are also fundamental to learning and capability building.  Of course, as the authors suggest, companies can learn a lot simply by reflecting more systematically on their performance with customers in terms of time consumed in the process and identifying root causes of customer support calls.

But the real learning occurs when companies engage with customers in the context of a trust-based relationship where each party is pushing the other to become better at what they do. This is the real value of customer communities, where customers connect with each other in more systematic and helpful ways, often (although far too rarely) facilitated by the vendors themselves.The recent gathering of vendors in eBay Live! illustrated this learning opportunity, as noted by Rob Hof from Business Week in a recent blog. Hof suggests that the friction generated by such interactions can often be mistaken for unhappiness, rather than as an encouraging sign that people are engaged and care about outcomes. The learning that comes from this kind of engagement with customers in the context of deep trust-based relationships is generally very different from the learning that occurs through making processes more efficient.

Is there a role for offshoring?

It also adds a different twist to the way the authors view offshoring.  They are generally skeptical of the benefits of offshoring to distant countries because of the greater difficulty and costs imposed in terms of rapid response to customer needs.

At one level, they have a valid point – companies often focus too narrowly on labor cost savings and do not take into account potential increased costs in supply chain areas like shipping and inventory.  On the other hand, companies increasingly are resorting to offshoring because they want to find ways to get better faster by working with other world class companies in environments where capabilities can be built much more rapidly. This introduces a more dynamic view of offshoring. Don’t just look at cost and efficiency trade-offs, even if you do it broadly across an entire supply chain. Focus as well on the opportunity to get better faster by working with more specialized partners.

Toward a more dynamic view of lean consumption

So, on the one hand, there is an opportunity to get better faster by working with highly specialized and motivated supply chain partners even if (and perhaps because) they are in distant locations. On the other hand, there is an opportunity to engage in a deeper way with customers around unmet needs.  Bring these two together and you begin to see a much more dynamic view of lean consumption than the vision presented by Womack and Jones. Perhaps lean consumption needs to be balanced by rich relationships. Think of the capabilities that could build.

Comments

[Cristal Mcmeans]

So Lean consumption is kinda similar to the ones I learned from our company's recent one piece flow simulation and lean simulations seminar. Apparently, This technique of production originated from Toyota.. no wonder they rose up to the industry so fast!