In the
current economic climate thousands of organisations have had to respond to the
challenge of operating with reduced resources. Typically declining revenue
increases the pressure on costs if margins are to be maintained or protected.
The standard response is to reduce costs but the success of this tactic is of
course finite and carries the risk of emasculating the growth potential and inhibiting the service levels of the organisation.
Could there
be another way of looking at the situation. One of the truisms in the world of
commerce is that “All organisations have to have cost but no organisation has to have
waste”. So should the first response be to search for and eliminate waste
rather that cost?
What is waste?. It is a word that has a myriad of dictionary
definitions but one which describes well ineffective management is:-
“To use, consume, spend, or expend thoughtlessly or carelessly – to
expend without valuable return”
Experience has shown that in every organisation there is
waste, whether at the lowest level of SME when over ordering envelopes through
to major public sector investments in poorly specified technology programmes,
but it seems that it takes a crisis to bring such actions into sharp focus.
Then, when a crisis hits, and everything comes under scrutiny more effective
solutions are sought in a frantic scramble to protect results. Often one of
these solutions is a focus on the performance of the customer base both in
terms of those segments or organisations which currently are the most valuable
and those which potentially present the greatest opportunity. The wisdom of
such an approach is unarguable.
Losing customers is waste. Some of it is not preventable,
typically up to 15% dependent on the sector but most of it can be avoided. The waste occurs in two main areas, firstly
from the loss of revenue from the lost customers but secondly from the sales
and development costs plus the organisational energy associated with replacing
the customers and their revenue base to a level that simply maintains the
status quo.
So why wait for a crisis?
Imagine your revenue will fall by 20% in the present
financial year, what effect would such a scenario have on the financial results
of the organisation and the service levels provided to customers? Could your
organisation find the difference by eliminating waste that exists throughout
its operations? What are the “must have”
activities and what are the “nice to have” activities that perhaps do not
deliver value? Is there a better answer than simply reducing price? Could the supply chain
be more effective? Is the organisation
delivering the right levels of service to its most valuable customer segments
or does one size fit all? Also what of your competitors, if they have a similar
thought then will your best customers become their best potential
opportunities?
One answer
is to have the elimination of waste as a key on-going organisational endeavour
not just in a TQ/RFT mind-set but to ensure that the optimum possible resource
is available to “expend with valuable return” to deliver to
the customer and thereby to the organisation. The ethos to drive such an aim
was captured by the last school teacher on the now uninhabited Stroma Island in
The Pentland Firth, Scotland with her advice to her classes
“Good, Better, Best - Never let it
rest
Until Your Good is Better - And your
Better’s Best”
Philip Forrest
