Early in my career, ISO-9000 was just coming into vogue and my employer, a Fortune 500 company, had earned the honor of being called ISO-9000 certified. To say the least, the ISO-9000 concept was a little irritating to a young, creative-type: Processes are documented, standardized, and followed without deviation because deviation yields an inconsistent outcome and inconsistent quality. Even worse, ISO-9000 principles were being applied not to manufacturing but to services, where the human factor was so important. While people certainly admire the fact that a Hershey bar has the same consistently delicious taste, would the feel the same if the service rep answered the phone in an identical manner every time, smiled at visitors in the identical manner and greeting them with the same Mr. or Ms. in the same robotic way? Somehow, ISO-9000 seemed to be forcing the soul out of services and driving creativity out of the American worker. This would not stand.
A big believer in creativity and diverse thinking, I know that the World's greatest innovations come from ignoring conventional wisdom and trying something a different way, so the question, "Does Process Improvement Kill Creativity?" is not trivial. However, there is a way to balance the roles of quality and creativity in your business, though the answer comes from two disparate figures: Geoffrey A. Moore and Kiichiro Toyoda.
For those of you who don't know Moore, he's a business geek's ultimate hero -- the man behind the technology adoption lifecycle, Crossing the Chasm, and Dealing with Darwin. It is in Dealing with Darwin that Moore introduces the concept of reallocating business resources from context to core. Context is all that work done by employees that does NOT separate your business from its competitors. Cores represents all work that is critical to delivering your products or services uniquely; core helps to separate you from your competitors and is the leading driver of innovation. According to Moore, businesses spend far too much of their time (80%) in context activities and far too little in core (20%) involved in the core.
Let's apply this to process improvement and process standardization. These exercises provide a window for innovation, then they lock down a process so that it yields consistent results. They also reduce a business' emphasis on context activities by removing unnecessary steps and automating once-manual processes. So, more time can be spent on the core, where a business can differentiate itself, developing new products or services with the creative mind.
Kiichiro Toyoda had a similar mindset nearly fifty years earlier when he developed the Kaizen philosophy of continuous improvement and the lean manufacturing concept targeting the elimination of waste. Founder of Toyota Motor Corp, Toyoda had a keen eye that focused human efforts on eliminating waste and improving processes rather than perpetually repeating them without question. Combined, Kaizen and lean are key reasons why Toyota leads in sales and product quality and why Toyota employees are among the happiest in the industry.
So, considering Toyoda and Moore when reflecting upon my past sins in the areas of process improvement and standardization, I've developed a few principles to keep in mind as we standardize:
(1) Wherever possible and cost-effective, automate. There's no sense in having people do work that a machine or computer can do faster and more consistently, especially when this is sure to dull the human capacity for innovation. Instead, people should monitor repetitive processes, not do them.
(2) Involve workers and end-users in innovation. Your best ideas often come from the line-worker, the front desk staff or a computer system's end-users. This also gives them an opportunity to flex their mental muscles.
(3) Focus your employees on creative efforts inside the core. If you have people who are spending their time trying to marginally improve legacy products or services, redirect them to activities that create new products or radically transform current ones -- efforts that will benefit most from the human capacity toward innovation.
(4) Leave room for creativity and individuality. Where product quality won't suffer and humans are involved in production, leave room for creativity and individuality. This one is the hardest to follow, because we know that a consistent product is best created by a consistent process. But, avoiding excessive detail in a process leaves room for grass-roots innovation and keeps the human mind engaged.
(5) Build a World that is Human-Centric. Human beings are inherently creative and intuitive: We move beyond patterns to think of completely different ways to solve a problem, create art or experience life. All of the products, services and processes that we create need to remain human-centric, recognizing that they exist for the benefit of humans and to add value to the human experience.
Looking back at the list, there's no guarantee that following these recommendations will bring harmony between high quality, innovation and human creativity. But having the list makes Cedar Point Consulting teams aware of the need for balance, while providing a set of principles to follow and measure our progress. As a result, we do a better job of allowing creativity to flourish in a high-quality environment.
Donald Patti is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in project management, process improvement, and small business strategy. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.
Last Updated on Monday, 22 February 2010 17:09
Product Pricing: Avoiding the Dead Zone
I was talking to an entrepreneur-friend recently about product pricing for business products, and the fact that there's a dead zone between the $1000 and $5000 price range that most successful products avoid. That dead zone exists for a reason and it's important to avoid it, as I will explain here.
For most businesses – even large ones – a purchase under a $1000 can typically be made by a first-level manager and even by a staffer. In some cases, they put it on a corporate credit card and in others they use a discretionary budget, but when the user wants your product, the sale is usually pretty quick and simple.
In contrast, a sale of $1000 or more often requires a mid-to-senior level manager's approval, a signature from purchasing and even a formal purchase order and invoice. In some cases, I've even seen $1000 plus sales rise to the VP level for approval, so this can become heck of a hurdle to clear to close a sale.
As a result of these restrictions, it makes sense to stay below $1000 if possible. But, why might your product need to be priced at $5000-plus instead of, say, $1500? The answer is the sales person. Over the $1000 price range, you not only have more hurdles to clear before closing a sale, you often have to use a one-on-one selling approach to close the deal, which requires a sales person. This sales person earns a small salary, makes commissions, generates expenses and only closes a portion of their leads, so suddenly a $1000 sale becomes very unprofitable.
It turns out that, in most cases, a sale through a salesperson is not profitable until the price reaches over $5000. Hence, the dead zone between $1000 and $5000.
So, if your business product or service is priced in the dead zone, there are things you can do about it.
If possible, move your product below the dead zone. Find a way to lower the price just below the $1000 threshold, break the purchase up in to multiple payments across multiple months, or sell a service-based subscription that generates monthly revenue.
If going lower is not possible, rise above it. Consider ways to bundle your product with others so that you can charge more and justify a salesperson, sell maintenance or support along with the product, or sell your product to someone else who can bundle it.
Stay in the zone. While this is the least appealing option, this option can work. Instead of using an outside salesperson, consider online ad campaigns with inside sales representatives at lower costs. Or, consider a multi-tiered marketing approach that allows for slack labor (college students, work-at-homes) to sell your product. Or, a viable option for a small business may be to sell the product yourself. (Hey, I already said it wasn't very appealing).
Interestingly, a dead zone exists to some degree for consumer products and services just as it does for business products, though the zone for consumer products is a good deal lower and it doesn't appear to be quite so “dead” – it's probably between $100 and ending at $500. It may be coincidental, but $100 is about the point at which I start running purchases by my wife and she runs purchases by me. Hmmhh.
Donald Patti is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in project management, process improvement, and small business strategy. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.
