Why We Love Service (And You Should, Too!)

Posted on October 12, 2014 Updated on October 12, 2014

We routinely stop at fuel stations to get some service, perhaps to add some fuel, have more oil added to the engine, perhaps for a car wash or even maybe to have a mechanic service the vehicle. I was in line waiting to be served at my local filling station and as I waited for my turn to be served. I could not help but wonder what it would take to get quicker service without compromising on quality.

There was plenty of activity at the filling station and even if it was busy, I imagined that there must be some acceptable time frame for serving a customer from the moment they drive in and stop at the fuel pump up to the moment payment is successfully processed.

As I was contemplating this, my mind wandered off to a time I first admired the intrigues and efficiency of teams in my favourite motorsport of Formula 1. Even though there is great competition between teams and individual drivers, there are some models of service delivery that can be borrowed over for our day to day experience at filling stations.

On the formula 1 race track, there is a special designated service garage area known as the “Pit”. A pit stop entails a race car driving off the race track through a designated access route to the garage area, where it will stop for a brief moment to be serviced, assesses for damages and have some components replaced as the driver takes some water to rehydrate his body and is later on released back into the on-going race.

It’s a great marvel watching the sequence of events that occur during a pit stop and by observing the minimal time it takes to accomplish those activities, it’s truly a feat of efficiency. A couple of season’s back, before some race regulations were changed by the sport’s governing body, the FIA, the pit stop’s activities looked something like this. On a race cars arrival at the pit stop, it is directed to stop at its teams dedicated location, is propped up at both the front and rear ends. There are mechanics on hand to loosen and remove wheel bolts on a tyre, a second one to remove the tyre, and the third one to replace the tyre that’s been removed with a new one and the fastens the bolts to hold the wheel in place. This happens for all four tyres, being replaced with a new set while fuel is being added to the race car. If need arise from some structural damage, there may be a replacement for a front end wing. All these activities are carefully choreographed with precision and timeliness and in flawless execution can take anything from four to ten seconds, and the driver is released from the pit stop to continue with the race.

That kind of service is mind boggling and coming back to reality, I wondered just how much of that kind of service excellence can be replicated to our day to day normal circumstances. By using some tools in Lean and Six Sigma methodologies there will be a great impact on customer service by increasing efficiency and also when waste is reduced, with waste being described as activities or processes that do not add value to the customer and also by reducing defects in these processes.

An operational audit can be done and this can look at factors such as where the revenue comes from, how the majority of customers are handled and who are the primary suppliers. Having these factors known would be great for the business so that it can position itself well in terms of operations, as well as have a good Business Process Mapping and Value Stream Mapping.

We can consider using SIPOC which stands for Supplier, Input, Process, Output and Customer in helping somebody understand a proper mapping of components of the business from front to end.  The supplier in this case is the car driver who gives the order. The input here will be fuel, lubricants and tyre pressure. The process would begin by the driver first arriving at the pump, the fuel attendant taking an order, adding fuel to the vehicles fuel tank, or air pressure to the tyres or adding lubricants to the car engine. The output should be correct air pressure to the tyres, correctly filling the required amount of fuel and lubricant levels. The customer’s requirements are that there is accuracy in filling the correct fuel type and quantity, the service being on-time and the products needed being available.

By using some management tools in Lean Six Sigma methodologies, there will be a great impact to customer service when waste is reduced and defects are minimized in the process. SIPOC defines the scope of work for a team and identifies at a high level the potential gaps between what a process expects from its suppliers and what customers expect from the process. This is helpful since it identifies potential gaps between suppliers and input specifications, and also between output specifications and customer’s expectations; thus defining the scope for process improvement activities.

In such a scenario, the greatest waste that would need to be worked on in order to create a better customer experience is the waste of time caused in waiting. This can be done by streamlining processes and making them consistent in outcome without defects or getting the customer order wrong. They will also need to remove unnecessary motion of people from their service points and can have the fuel pumps area redesigned well in order to have  lubricants, an air pressure dispenser, and water jar so that a car does not have to drive from one point to another to access services that can be conveniently offered in one place.

Cycle efficiency can be increased tremendously through such a form of organisation of the work area, being the forecourt area and the management would do well by using XY Priority Matrix, which should be preceded by the voice of the customer input. This may come from various surveys or other efforts to collect customer priorities. In such a scenario, this service station could be trying to determine how to improve its services.

Customers could indicate that “fast and easy to get assistance” is their number one priority and “more fuel attendants” as their second priority. It would be easy to identify the priorities through voice of the customer, and by listing them correctly in order, management can brain-storm on ideas that can lead to creating service improvements.

The XY matrix is a tool that will allow a team to make informed decisions by comparing two sets of information and analysing the relationship between them; and will allow you to consider a list of characteristics and visually see patterns between them. That way the team can make decisions based on data rather than opinion and most importantly incorporate voice of the customer input in decision making.

This is why we love service. We help our clients improve their performance and achieve sustained profitable growth within the global market. We believe that if clients are happy with the service or product, they will be willing to pay for it. We drive this improvement by looking into the areas of People, Technology optimization and Process improvement.

Nicholas Maina Karuere – SigmaStrat

Why Mergers and Acquisition fail

Posted on May 19, 2014 Updated on October 12, 2014

In July last year, the world woke up to a $35 billion merger announcement of US based advertising giant Omnicom and its French counterpart Publicis, initiated to cope with an evolving advertising industry dominated by tech giants like Google and Facebook.

The merger deal was expected to dethrone WPP as the world’s largest advertising agency, heralded as a merger of equals.

Close to one year later, the biggest acquisition deal in the advertising industry was called off last week.

Merger or Acquisition deals have always been frenzied as a guarantee of tapping into various growth opportunities such as acquiring new products and expansion into new geographical areas or access to new customers. This is in addition to motives as improving profitability and the company’s strategic capabilities and positioning in the market.

Analysts had predicted the 50-50 ownership deal between the two ginormous advertising holding companies as a union would provide scale and capital to cope with technological forces reshaping the industry.

But research indicates that Mergers and Acquisitions have an overall success rate of about 50% only, that’s in the post-takeover period which is the integration process. The deals always look good on spreadsheets but few organizations pay proper attention to the integration process.

This can be attributed to the misleading notion in Finance and Economics field that Mergers or Acquisitions are a clear roadmap to increased market share. Researchers from these areas have always measured the success of a merger by the change in the stock rates in the first few days after announcement of the merger. The basic assumption is that the stock value reflects the company’s value in an objective manner based on all the existing public information. The idea is that the immediate change in the stock price reflects changed expectations on the value of the firm, and thereby indicates long term trend.

Therefore, they assert that every M&A that causes an immediate rise in the stock value reflects success and creates value for the stockholders.

Case in point, Sprint acquired controlling stake in Nextel communication in a 35Billion stock purchase in 2005.These two companies believed that merging opposite ends of a market’s spectrum would create one big happy communication family for only $35 billion making them the third largest telecommunication provider.

At the time, both Sprint and Nextel had a market capitalization of 30Billion and it was viewed as a merger of equals. In 2006 their market cap had even climbed to as high as $76 Billion, only to plummet by 2008 forcing Sprint to write down an astonishing $30 Billion.

It’s now considered as one of the worst merger deal to have happened in recent times.

The good thing is that most SME’s are not involved in M&A deals as a way of positioning itself in the market or increase market share, it would have been disastrous all round the economy.

Most SME’s have been sidelined by this Finance and economic scholars’ yardstick because they have no financial muscles to absorb a bad deal and patch it up like the large companies who have the resource and skilled managers.

Another constraining factor which I believe is a “blessing in disguise” for  SME’s is that they have no proper financial data that can be manipulated to know financial implications of doing an M&A deal, they too have insufficient management capacity to take on the integration process, in fact most are stretched to keep the business running.

I say it’s a “blessing in disguise” for them because no amount of management can fix an acquisition that should never have happened. Large companies can high the best consultants to turn around or salvage the deal but sometimes it still doesn’t work, recovery alone can cost as much time and resource than the total cost of the merger or acquisition.

With the Omnicom-Publicis deal off the cards, WPP which will still keep its crown as the world’s largest advertising agency, used the uncertainty to negotiate better terms by cutting its fees and winning a lot of work worth more than $1.5 Billion from both Publicis and Omnicom clients in the past month alone.

What Finance and Economic researchers have ignored when analyzing the success of M&A deals is that the real success of the deal is in the integration process, the integration process is a long term process and not short term.

It’s easy to buy but hard to perform an M&A deal.

So why do M&A deals fail?

In general, many mergers are characterized by the lack of planning, limited synergies, differences in the management/organization culture, negotiation and difficulties in the implementation of the strategy following the choice of an incorrect integration approach on the part of the merging organizations after the agreement is signed.

The key sticking point that delayed the Omnicom-Publicis deal was that the two companies possessed strong divergent corporate cultures that couldn’t merge leading to a clash.

Omnicom wanted their people to fill the CEO, CFO and General Counsel jobs diluting Publicis management representation but Publicis were not ready to cede much position to such a point. The Chief Financial Officer was the key position both companies were eyeing because it was the position of influence on whether the new company should incline towards a centralized structure to manage costs which Publicis argued had driven its higher margin, while Omnicom was looking towards a more devolved approach.

Most companies never thoroughly assess the culture of the target acquisition and its compatibility with their own company’s culture.

During the pre-M&A deal, companies never try to resolve cultural differences that threaten the success of a merger. There is always an unconscious segmentation, that one team works on the due diligence to make sure that they understand all the financial implications of the deal and a second team works on the integration of business.

Then most M&A deals are not in line with the corporate strategy, when the target’s strategy is a diversion it’s always costly to change its course.

Also managers are always quick to seal M&A deals acting out of pressure from the board of directors and stockholders to show continuous growth, without looking at the big picture.

The main reason why M&A deals fail during the integration stage is that an operational audits that help decision-makers understand the operational implications of the deal is never done to accompany the due diligence report, which only captures the financial implications.

An operational audit looks at a few vital things like where the revenue comes from, how the majority of customers are handled and who are the primary suppliers. The best tools to use in doing this is a BPM (Business Process Mapping) and VSM (Value Stream and Mapping) activities which map out major components of their business from end to end.

VSM is an end-to-end system map that takes into account not only the activity of the product but also the management and information systems that support the basic process. It documents, analyzes and improves the flow of information/material required to produce a product/service for a customer. It helps one to understand the flow of material and information as a product/service making its way through the value stream.

An operational report gives shrift to assessing the target company’s operational effectiveness, providing a clear snapshot of the linkages across customers, operations, systems and financials.

A pre-M&A operational audit is important because it facilitates the transition from paper synergies to real operational improvements, providing the building blocks needed to create a business transformational roadmap without negatively impacting the customers and employee existence.

The operational understanding combined with other components of the due diligence process-financials, management composition, legal risks, willingness to embrace change and the asking price –  creates a more complete picture of the value at stake.

Therefore, meticulously and diligently screening deals for integration always increases odds of success.

Written by Tony Watima.

SigmaStrat

http://www.sigmastrat.com/

Training is not Learning

Posted on December 26, 2013 Updated on December 26, 2013

Training is not learning. Learning is a process that occurs when an individual behavior changes and it happens over a period of time whilst training is an event that occurs to facilitate the learning process. Training is a small part of the learning organization which has the outcome of helping others to learn.
Very often many people do not know what is meant by performance improvement and training in an organization. Well, let me define it in the general terms for us to follow.
Performance improvement is the systematic process of discovering and analyzing important performance gaps, planning for future improvements in performance, designing and developing cost-effective and ethically justifiable interventions to close performance gaps, implementing the interventions, and evaluating the financial results.
From definition, we can see that performance improvement is in two (2) folds; discovering the gaps and planning a suitable learning system for it. Discovering the gaps deals with competency measure using forms and documentation supplied in class room training sessions, internal and external customers input and 360° appraisal and then measuring the technical knowledge of the product or service being offered by written evaluation, percentage of gain through training courses and self learning materials used.
Find out more how SigmaStrat can make an impact in your professional journey or your organisation’s people development endeavour. We serve both the West and East African markets from our offices in Accra and Nairobi. SigmaStrat – the team development & performance improvement people. http://www.sigmastrat.com