In previous blogs we have discussed the need to follow a clear objective, and to do the right tasks in the right way. Now we will talk about how to identify the “right tasks”. The right tasks are those tasks that add value for the customer.
To concentrate on adding value for your customers seems an obvious approach. But as we will see, it is easy to lose sight of this objective and become embroiled in administrative minutiae.
We can define “added value” as work or output that the customer is directly willing to pay for.
This simple situation is not the norm for most companies.Customers demand complex products assembled from multiple inputs.Customers demand high volumes and low cost, which demands can only be met by large scale factories and enterprises.
With complexity and scale comes the need for coordination.The customer does not want to pay for coordination. The customer only wants to pay for the final output.
Here is the paradox.Coordination is certainly necessary and often is very hard work, but coordination is not adding value because the customer does not want to pay for it directly.
Let us review two examples.
The bank manager decides he will grant a car loan.The customer receives value.If the loan has to go to a vice president for extra approval, the vice president adds no extra value.
The store manager decides what needs to be ordered for tomorrow.No individual customer directly benefits from this work, and so the manager does not add value.
So we can see a pattern.Adding value tends to require human skill (the seamstress) or human judgement (the bank manager). We can categorize much of the other work as “Control and Transfer” work (the vice president, the store manager). Though it may be necessary, Control and Transfer does not add to profitability.
We should be very strict on our definition of “Value Added”. We must not be confused by considerations of “necessary” or “hard work” or “useful”.
We saw that the freelance seamstress provides value 90% of her time. However, overall, organizations spend only 20% of their time on work that adds value to their customers[i]. 30% of non-value work is a business requirement, such as the calculation of taxes. 50% is purely wasted effort.
So the temptation is to take that non-value work and automate it. An example is the proliferation of bar codes to reduce data entry work. Such automation approaches can reduce the pain but do not solve the fundamental problem of poorly designed or outdated work processes.
In a follow up to his classic work[ii], Michael Hammer said “Reengineering Work: Don’t Automate, Obliterate”[iii]. This is good advice to follow.
Take a look at your processes and be very strict on identifying the very few tasks that actually add value to the customer. Restructure your processes to concentrate on those value add tasks.
[i] Kaiznen. (n.d). Defining Value and the 7 Wastes. Retrieved from: http://www.kaizen-training.com/tools-techniques/defining-value-and-the-7-wastes
[ii]Hammer, M. and Champy, J. (1993). (Updated 2003). Reengineering the Corporation: A Manifesto for Business Revolution. HarperBusiness
[iii]Hammer, M. (1990, June). Reengineering Work: Don’t Automate, Obliterate. Harvard Business Review