Recent work with a client brought home to me again the interplay of TPS (Toyota Production system) and intuition.

We were working on developing a job scheduling system in a classic job shop environment. We had worked out a rough value stream map from sales inquiry to shipping. It was clear that there was very little data anywhere. This was a small business environment where everything existed in the heads of the key players. The owner repeatedly asked when we were going to get to the job scheduling system and, “Mark, what is it going to look like and how will it work?”

I kept fending the team off by telling them that we had to push our mapping as far as we could and then, “The answers will appear from the map. It will be clear to all of you how to solve the problems.”

So, we pushed ahead until we reached the point where we needed to develop a simpler sense of the flow of the work. When I asked the team to identify the key groups of activities among all of the ones on the wall, they readily came up with five and, with a bit more discussion, we ended up with seven work centers. Based on the group’s intuition we then designed some job packages and a rough scheduling board to help us put into practice a visual job scheduling system.

This system is now up and running. Improvements are coming regularly. For the first time in the history of this 22 yr. old business, everyone can see what jobs are on the floor, where they are, and each person can pickup a job packet and know what it is that needs to be done in their work center without asking for advice, very often.

The key for me is my faith, demonstrated repeatedly in action, that value stream mapping and job shop lean flow processes can encompass just about any job shop environment. If you follow these practices you will reliably discover a solution that will produce significant steps towards a high-performance business. And, the best part is that with your guidance (and keeping your mouth shut) the team will discover their own solutions that they can continue to improve long after you depart.

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Yesterday’s New York Times contained an article by David Pogue, “Mom and Pop Get a Partner: Microsoft”, that announces a whole new suite of services for small businesses from Microsoft. And they are all virtually free. You can set up a website in minutes, purchase your own domain name for free for the first year, get email, use collaborative tools including calendaring, project management, shared documents and more. All of this come with some pretty powerful user access controls so that you can set up teams to collaborate internally or include your customers and everyone sees and changes only what they are supposed.

I would say that anyone in a startup or small business who does not already have a website and these other tools should immediately click on over to Microsoft’s OfficeLive site and check this out. This will require some real work to take advantage of all of the tools available here, but it is not often that such a comprehensive suite is available essentially for free.

If you add a few web-based applications for writing, number crunching, and presentations, clearly we are approaching the new world of cloud computing more rapidly than I had thought. I regularly use  Buzzword for my writing. Others may like the suites of tools at Google or Zoho, for example.

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An important step for every business manager is to understand where profits are coming from. Too many managers are relying on  the basic Profit and Loss statement that comes to them from their accountant. This is not always a useful management tool.

Lets take a look at a situation where a web-based services company is experiencing good growth and reasonable profits. They have four lines of business addressing their single basic service to four different markets. Based on their market analysis, they decide that they will focus their marketing dollars and development resources on one of the four for the next year.

Six months into the mission, sales have continued upwards, but profits are not tracking along at the same rate, the quality of earnings is suffering. Why is this happening?

First they muscled their way through some spreadsheet work sorting out their COGS (Cost Of Goods Sold) and reassigning previously Fixed Expenses in marketing that really could be assigned to each of their four market areas. Then they discovered that the the market segment that they had focused their efforts on had never been very profitable and they had made the situation worse by increasing the sales volume through it.

On closer analysis it became evident that the lack of profitability came from two sources. First, the marketing costs of acquiring customers in  this market channel had been 60% higher than in  the others. Second, the vendor providing the back office services supporting this channel was 30% more expensive than vendors supporting the other market segments. In the short run, the managers decided to shift their focus to another one of their markets. In the long run they decided to search for a better vendor and conduct some research on why the marketing costs were so high.

So, if you have a business where you are selling more than one product or service to more than a lone customer, think about developing the financial management tools that will tell you where your sales and profits are actually coming from.

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We have recently added a new feature to our operations improvement work for services firms.

To improve the productivity, responsiveness, and quality of services, a common and very valuable approach is to organize a cross-functional team and value stream map the activities. This quickly produces many opportunities to improve flow, simplify tasks, and shrink response times. One frustration with this technique is that it provides no approach to how to model the “moments of truth” that are really the focal points for all service production.

Moments of truth are those interactions with customers (these can be in person, over the telephone, and via a web interface amongst others) during which a service is created and delivered. It is the moment when a question is asked and an answer provided. Or, it is the more complex environment in which the service provider and the customer collaborate, even if briefly, to solve some problem with a product.

In the end, even if you get all of the other aspects of your service production right, if the moment of truth goes awry, the customer leaves feeling less than satisfied. The customer perceives the service to be inadequate.

So, building on work by Christian Gronroos and others, we have started working with a service model that we call “MT” to capture all of the key elements required for a successful service event. This is adding significantly to the richness of our value stream mapping and filling this gap in performance improvement.

For a challenging introduction to moments of truth, see Christian Gronroos, Service Management and Marketing: managing the moments of truth in service competitition (Lexington Books, Boston 1988).

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