In our last Continuous Improvement IT (CIIT) post, we discussed how an IT organization can embrace the five principles of lean thinking to deliver positive results to the company, and more importantly, the company's customers. We'll now take a deeper look into each of the five principles, starting with "Value."
The term value is hard enough to define by itself, but adding the perspective of IT to the term makes it doubly so. Several definitions of value are out there in the Lean / Toyota Production System world, including:
• Value = Quality / Cost
• Value is anything for which a customer will pay
• Value is the perception - by a customer - of the ability of a good or service to meet their needs
No matter how you define it, we think the key takeaway here is that value is solely in the eyes of the customer. In other words, it is not up to the company to define the value of its products and services, it is up to their customers to do so. And customers prove how much they value a company's offerings through a primary method: the exchange of cash.
As somewhat of a purist, we prefer the second bullet point above, where value is shown through the exchange of money by the customer for the goods or services of the company. And the point of CIIT is that you maximize those process steps that add value to the customer, and eliminate or - worst case - minimize those that do not. But this definition poses a problem for IT departments which are largely internally focused. How do we define "value" in this case?
Consider the following examples of IT services. Are they value-added or not?
• Backup and recovery
• Networking hardware
• PC provisioning
• Unified Communications
• Installing software
• Mobile device management
• Router configuration
We would argue that none of the above are services for which a customer is willing to pay your company a dime. They are necessities of doing business, but do not inherently add value to the company's products and services by themselves. They can, however support the addition of value - for instance if you enable an onsite service technician to provide faster support through mobile devices, we’re sure that you can contribute to the technician's ability to provide better customer service, which itself is probably value-added.
To define customer value in terms of IT, you need to look strategically. What IT services or projects align and support the company's services and products directly? And barring a direct link, which have a significant effect at enabling better value? Consider the following examples:
• Linking the customer's inventory and purchasing systems with your ordering system to automate the ordering, invoicing, and advanced shipping notice of frequently ordered products
• Providing tailored analytics which helps your customer see how changes to their ordering patterns may save them money
• Automating processes for a manufacturing firm's purchasing which shortens lead time of raw materials and thus delivers product to the customer sooner
In each of these three examples, the customer is directly and positively impacted by the efforts of the IT department. They receive better service, a better customer experience, suggestions on how to improve their own operations, and their product faster. Do you think that these positive outcomes would influence the customer's buying decision in the future? You bet they would.
In a future blog post, we'll cover tips and techniques to best align your IT department with the strategic needs of the business and on delivering positive customer outcomes.