As simple as it can be

Simplifying things is a challenge for any business. If you have a simple process, people can follow it without making mistakes. If you have a complex process, mistakes can and will be made.

I find that quality management systems often appear to be over-complicated. There’s a theory that goes something like this –

‘The system is important. Important things are complex and difficult to understand, so they are written in complex language.’

If you add to this theory the individual who overplays the difficulty of their job, you have the quality management system that becomes a bureaucratic nightmare  –  otherwise known as the business prevention system.

Those are the systems that people hate. They are seen as restrictive, serving only to enforce compliance.

One recent experience with a customer – a very large organisation – illustrates this. They were returning a unit to us for some additional development work, but the unit had been purchased as a standard unit, not for development.

We’d agreed in April to do some further work. In July, after several emails, we got a reply from someone in the customer’s team, a frustrated engineer. He told us –

‘I can’t send you the unit. It’s sitting on my desk, but it’s so far into our systems that I can’t work out  how to send it back to you.’

I’m sure these were exceptional circumstances, but it’s an example of a system hindering the business.

However, if you can take a step back and look at the reasons why particular processes or procedures exist, you may find some nuggets of value.

A procedure or process often came into existence to resolve a problem. Over time, extra layers were added. The result is that you end up with a complex mess.

When you set about simplifying a process or procedure, start by asking, ‘Why does this exist?’ and create a simple process to deal with just that: ‘Why?’.

If that’s not possible, perhaps the process is trying to do too much?

You’re likely to find examples of trying to do too much when you examine  complex assembly processes. We have processes that are extremely complex – one product we analysed recently had 174 parts. Any process that tries to capture such a large assembly of parts is going to be complex.

However, it’s possible to view that product as a number of different sub-assemblies. Each of those can still be regarded as complex, but there are probably only 30 parts in the most complex of them.

We have an overall procedure in place to assemble this product, but the lead procedure is simple and refers to the sub-assembly procedures, which in turn are also simple.

Making a process or procedure simple isn’t easy – but it can add great value to your business.

Keeping a customer is easier than finding a new one

I was reminded of this yesterday by discussions in an all-day meeting planning the future of the organisation.

We’re taking a new direction, investing some additional funds and resources to increase and re-shape our marketing so that we can win new business. The meeting yesterday focused on the strategy in the morning, then the tactics in the afternoon – a very productive day.

Towards the end of the day we turned to the subject of customer retention, and realised there was a possibility that some of our new activities, unless carefully communicated, could disappoint and disillusion our existing customers.

We chose to forego some of the whizzy new stuff to keep the existing customers happy. It does not mean we will not do it – just not yet – and the cost to us is minimal. There’s an opportunity cost, to be sure, but it is pretty small.

If you lose 10% of your customers in a year, you’ll need to add 11% just to stand still.

If you break down your revenues by customer, and then by order size you get a formula that looks like this:

Total Sales = Customers x Sales per Customer

Sales per Customer = No of Orders x average order value

So to grow your total sales, you can either increase your number of customers or you can increase the sales per customer.  One of those is much harder than the other!

To increase your sales per customer, you can either increase the number of orders (the frequency with which the customer shops with you) or you can increase the average order value.

So, how much of your marketing effort is devoted to your existing customers?