The reductionist flaw at the heart of Lean
Charles Bennett
Helping make Customer Experience your Business Game Changer. GCC Customer Experience Training & Certification Academy. Co-founder E3 - Biggest CX Conference in GCC. GamechangerGCC Podcast Host.
In the first part of this series on Lean <MORE>, we examined basic evidence that supports what could be construed as an outrageous claim that most Lean service programmes don’t deliver much value to the customer.
In the second part we expand on this and examine how reductionist thinking patterns create behaviours where the customer becomes almost an afterthought.
Understanding reductionist thinking
I have encountered reductionist thinking many times in my career and repeatedly observed change implementation followed by change success and cost base improvement. The cost base improvement proved short-lived and the company found themselves in a worse position than previously.
Let me illustrate. A few years ago, I was working in Australia and I needed to be at a client’s offices in Brisbane for a number of weeks. I wanted a reasonable quality hotel with a gym and swimming pool within a 15-minute walk of where I needed to be. Jumping onto Expedia, I quickly found a hotel that fitted the bill. In fact, it looked fantastic. The couple at the check-in desk wore Hollywood smiles and the husband had biceps the size of tree trunks. The bedrooms featured supermodels drinking Bollinger Champagne all in a state of relaxed bliss. Do you know what? I almost fell for it. As my hand hovered over the buy button, I reminded myself that I should check the review sites.
The reviews were terrible – threadbare carpets, scuffed and dirt on the walls, insipid drinks in the bar, queues to wait for everything and one review mentioned cockroaches in the bedroom. What do you think a customer facing this sort of reality was going to do? Run a mile – and I did too.
I remember going back to Australia and heard the hotel had changed hands and made the point of meeting the new manager who told me exactly what had happened. As the hotel’s performance figures fell closer to loss, they decided to assign consultants to identify initiatives to quickly improve performance figures. They carried out a performance impact review and decided on two immediate initiatives:
- Cut as much waste out of the cost base as possible
- Attempt to increase room utilisation rate by extra marketing plus deals and then creating extra revenue via other products and services in the hotel.
In truth they recommended a refurbish but concluded that was part of a longer-term play with little expected impact for at least a year.
Marketing initiatives dropped the price of the room by an average of 20% and money was spent on better brochures, glossier website etc. This was countered by an increased number of menu options and cocktail happy hour specials.
The staff numbers at the hotel were cut. The hotel found cheaper suppliers both in the restaurant and the bar. Remaining staff were placed on higher productivity targets.
The immediate impact appeared to show success. Room utilisation initially rose by 10%. The cost base reduced by 20% and profitability, which at that stage was poor, increased by a staggering 200%. The consultants left with accolades and great testimonials for helping quickly turnaround the basis.
Except it did not last. In fact, it lasted 2 months then performance figures fell away so quickly the hotel fell into loss.
This is the curse of the reductionist:
- Room prices may have reduced for deals but a room which was 120 AUD per night and reduced to 99 AUD is hardly going to be attractive if reviews complain about cockroaches in the bedroom.
- The reduced staff numbers with higher performance targets were so busy doing their functional work the customers became almost an inconvenience.
- Cheaper suppliers meant the quality of the food in the restaurants and drinks in the bar dropped. Customers quickly realised they could do better elsewhere.
When a story is played out like this the answer is obvious.In fact, many change practitioners would claim “we would never think about change this way”. Except they do. Regularly and repeatedly. The waste, cost and other issues can be driven out of a process, but the customer is all too often left as a minor component in the change program. The result is the initial problem may be solved but customer experience levels are also reduced.
Revenue lags improvement in CX
Customer experience is directly related and usually proportional to revenue but revenue impact lags CX improvement
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In this case study, the overall customer experience took another dip even though the cost base was changed. This is akin to giving paracetamol to treat a brain tumour – the pain goes away for a short space of time, but real challenge has never been resolved – or in fact identified.
In the final part of this series we will examine what BPM and Lean Practitioners should do differently
Director general y CEO | Innovación y Liderazgo | Apasionado del Cliente y de las Personas | Transformación Estratégica y Gestión del cambio | Cultura motor de la empresa | Nominado a Ceo por la innovación |
6 年Usually short term actions are constraints for our long term solutions. It is always the same tricky game; what was first, the egg or the chicken? Tactics versus Strategy. There are balanced solutions but when you stop looking at the long term, for sure you are lost.
Managing Director | Smart Parking solutions | Mobility As A Service | B2B | Industry | Technology
6 年Thanks for this article, the exemple is very self explanatory and can be duplicated in virtually any other business ! A great learning from the LEAN approach is to keep focus on what makes value for the customer, ALWAYS. One question however about the cost/revenues curves: in the chart I don't understand where the cost reduction comes from when increasing the Cx and then thge revenues...
?? Turnaround & Restructuring | Business Transformation | Financial Performance Improvement | Crisis Management | Private Equity & M&A Advisory
6 年Charles, I was waiting for the second article and like how you have coined the phrase "Reductionist Thinking": indeed, one can clearly see that the Consultants just looked at 1 metric and 1 component of the "Profit" equation, ie bottom line. Could you share some more about how you track improvements and how you get the Client not to jump for the immediate profit, ie how do you stop this Reductionist Thinking from happening?