Planet Lean: The Official online magazine of the Lean Global Network
How to apply lean management in the service industry

How to apply lean management in the service industry

Stephen Parry
July 31, 2014

INTERVIEW - As the use of lean continues to grow in the service industry, questions abound on how this sector can use the principles and practices effectively.

Interviewee: Stephen Parry, Senior Partner, Lloyd Parry

Planet Lean: In what ways do you think a manufacturing and a service environment differ when it comes to lean thinking?

Stephen Parry: I think that the metrics we often use in services are a reflection of what we think the customer values, as opposed to what they actually value. We often fool ourselves into thinking we know what our customers want. Then we go to them and find out it’s something completely different.

We are in a world of constant change, and that also means change in customer requirements. In services we can respond to that change more quickly than in manufacturing. But only when we define ourselves by the value we bring to customers can we become responsive enough to survive.

PL: How can you effectively figure out what the customer idea of value is?

SP: You need to know your customers and have a clear idea of what they want. Traditional tools such as a voice of the customer survey aren’t necessarily enough, as all of their questions come from the product, not from the customer. Focus groups are not the way to go either: how many cars designed with the support of focus groups have we seen flop once taken to market?

The first principle of lean encourages us to understand value from the customer perspective, but that activity is often based on the assumption that the product we are making is the right product. The idea of going to the gemba, too, is too often based on the assumption that we are producing what the customer wants. In services, we do more than going to the gemba; we go to the customer’s gemba.

Ask yourself where the demand comes from, what the requirements of the customer are. It is an investment in time, but it pays back dividends. It is not the same as market intelligence; it’s operational intelligence gathering directly from the customer.

PL: Is the fact that the gemba for a service organization is the customer’s house or place of work one of the reasons why we often struggle to define value in a service environment?

SP: Correct. That’s why getting out of the office and interacting with the customer is even more critical. A lot of people who talk about going out to find “the voice of the customer,” simply come back with a report whereas the best thing to do is to involve the customer in your transformation. And that is really scary for a lot of people.

PL: Why wouldn’t people be able to apply this idea to manufacturing?

SP: In manufacturing, the process is much longer and, in it, the customer is way back. It comes after product research, product development, and so on. Additionally, the customer doesn’t come to your plant, watch you make the car and suggest changes along the way. In services, however, the customer is right there in front of you all the time. That’s why our learning cycles are much faster.

Value as defined by the customer can change in a second, but manufacturing simply doesn’t have the ability to respond to it as quickly as a service organization. The people in manufacturing doing assembly work simply assume that they are building the right car. They never find themselves face to face with the customer. In services, every worker does.

PL: Customer care is one of the greatest weaknesses of the service industry, especially from a customer perspective. Should we try to improve it or aim to altogether eliminate the reasons why it’s still necessary?

SP: Bill Price and David Jaffe wrote a book on the subject, The Best Service is No Service. I would not go as far as saying that - I believe that the best service is providing value - but there is one problem with, say, call centers that we have to address: they don’t know how much of the work they do is actually creating value and how much is simply restoring it. Raising consciousness about how people are treated in call centers or designing better jobs for employees are important steps, but until we start to properly capture information and understand the work we won’t be able to change customer care and actually create value for customers. The idea that happy employees make for happy customers is not enough.

PL: Is fixing a problem for a customer a form a value creation or should we see it simply as “restoring value”?

SP: Being good at fixing one problem does not mean tackling the root condition (not cause, but condition) that led to it. How do you put out a fire? You either remove the heat, or remove the oxygen, or remove the wood. What we normally do is throwing water at the fire, but once it dries up the heat comes back and the fire slowly resumes. But if I remove all three causes, I’m sure I won’t have a fire.

You’d think that knowing that there will be mistakes we would build processes that can prevent them from happening. Toyota does, after all. However, very often people cannot imagine what error proofing means in services. That’s why every process or sub-process should have the following three mechanisms in place: error detection, error correction, and error prevention. Lean is all about learning to set error traps.

PL: In your experience, what is the most difficult aspect of embracing lean thinking?

SP: Say you are at a party, and everybody is having a great time. All of a sudden someone comes and turns the lights on, exposing the mess that you need to clean up. The biggest challenge for a lean manager is turning the lights on.

Before doing that, senior leaders have to almost declare an amnesty and reassure people that they are not going to get beaten up for the mess the light will expose. That’s why trust is so important. If you are in a business where you have to be brave in order to admit you made a mistake then you have to transform the trust landscape before you can transform the work. 

Problems are to be embraced as opportunities for improvement. Even when there are no problems, lean makes us raise the bar and admit that things are still not good enough.


Stephen Parry is an expert in the application of lean in services

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