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GP5Aug:  Sigma Six Service

Sigma Service.  We have recently put up a note (Agile Companies #165) about the effort to apply quality improvement  techniques, traditionally reserved for manufacturing, to a host of services:  from back-office operations at financial service companies to customer service processes at manufacturers, utilities, etc.  This is all to the good, because service is the real growth factor in advanced economies such as ours, as manufacturing migrates to cheap labor countries.  It’s no accident, in this regard, that IBM has shifted its skew to consulting services, most recently buying Price Waterhouse’s consulting outfit.  To grow, companies must offer services; to grow profitably, they must render these services terribly well.  But it’s the rendering well that they are not doing. 

Utilities Hurting the Most.  If you use electricity or talk on a telephone, you know how bad service can be.  Recently, for instance, one of the nation’s most esteemed utilities took 7 hours to respond to a fairly simple electricity outage.  Customer service personnel could not transmit the nature of the outage to engineering; they were not equipped, moreover, to ask the right questions of the customer, much less communicate the right complaint to the fix-it people.  That later led to two sets of personnel being sent to the problem site as well as other mishaps—a very unnecessary cost.  And, of course, no repair times were spelled out for the customer, although it was terribly clear that engineering knew about when it could show up.  Remedial actions, after the repair, which might avoid future breakdowns, were never contemplated or taken.  It would be fair to say that almost nothing about this service process was correctly designed.   

Similarly, during the month of July, a minor auto damage claim took 9 days and 4 people at 4 different locations, accompanied by lots of hectoring phone calls, to get acted upon.  The claims process of this insurance company is clearly terribly expensive, and this excess cost obviously exceeded the amounts the company saved by delaying disbursements. 

Good Conversation.  Examples of good, low-cost service do pop up all the time.  A catalog firm provides its customer service people with enough data to save lots of time on re-orders.  A Delaware credit card firm allows its phone people to cancel dubious charges, with good will and savings accruing all around. 

We have said in a previous letter that the first test of a good company is whether you can pick up the phone and reach somebody helpful in less than 5 minutes.  Clearly that eliminates AOL Time Warner’s cable unit.  But some companies make the grade. 

If the phone is picked up, then we must see whether the customer service person can ask meaningful questions and whether the information actually reaches someone who can act on it.  Does the information get transmitted to operations?   Finally, of course, we have to discover whether we can then get real-time updates as to when an order will get filled or a problem resolved.  Fed Ex and UPS, for instance, tell us on the Internet where our package is in the transit chain; if it is delayed, we can adjust our business plans realistically.  We can avoid “airport syndrome,” where one waits around an airport for an aircraft that is never going to make it, a result of the airlines’ calculated insistence on not  giving out meaningful information.   

There’s nothing worse—for a customer or for a provider—than a customer who simply does not know what’s going on.  Quite often, in fact, that means the company does not know what’s going on as well—at great cost to everyone.  What we discover, in looking at customer service, is that customers often cannot talk to the company, and worse, that the employees of a company can’t even talk to each other.  Everybody is stymied.  That’s the nature of a broken system.   

Dell Does It.   All this would not be worth talking about if things were hopeless.  But they are not.  Dell lands computers on our doorstep, configured to our wishes, in a terribly short period of time.  The small limousine service in a Northern city knows an infinite number of routes around town, finding ways to beat even the most obdurate traffic jams.  The Wall Street Journal makes its way to our door more reliably than other papers, but when there’s a glitch its service personnel know about the problem quickly and already have worked out the solution.  Service done right is not only a competitive advantage, but often it is cheaper than getting it wrong. 

P.S.  We talked about companies and the telephone in our July 1 letter below.

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