CHAPTER FIVE
The Discipline of the Client Fulfillment Leader
“And yet, no customer ever perceives himself
buying what the producer or supplier delivers.
Their expectations and values are always different.”
From Innovation and Entrepreneurship by Peter F. Drucker
At the heart of the World Class Company is its ability to satisfy the unconscious and perceived needs of its customer better than any other company can, not just by doing what any business is supposed to do—fix cars, vacuum carpets, stand behind the quality of its products, etc.—but by doing what it is not even reasonable to expect you to do. And to do that time after time.
That is the client fulfillment leader’s purpose: to design, build, implement, and improve the company’s Client Fulfillment Operating System, Client Fulfillment Training System, and Client Fulfillment Management System to keep the promise the company’s marketing leader has determined your company needs to make to your market in order to successfully differentiate your company in the mind of your consumer from all other companies who are trying to do the same thing. So that your consumer sees your company as preferentially unique.
Quite a mouthful, perhaps, but also quite a responsibility.
For it is the ability of these three systems to work harmoniously together that will determine your company’s ability to do for your customer what it is not even reasonable to expect you to do, time after time, while, at the same time, continually improving upon your performance.
It is how well these three systems work together to keep the promise you have made to your customer that turns him into a client.
Which brings us to the distinction between a customer and a client.
A customer is someone who buys from you once. A client is a customer who returns to your company time after time. A Client Fulfillment System is the method you use in the operation of your business to convert a customer into a client, and to, hopefully, retain him as one forever.
Your Client Fulfillment System includes every interaction you have with a person from the moment they become a customer. It is the number of customers who are converted into clients, how long you retain those clients, how much they buy from you for as long as they are clients, and how many of their friends and family members they refer to you that tells you how well you’re doing as the client fulfillment leader of your enterprise.
Your first measure of success—how many of your customers are converted into clients—is your company’s Customer Conversion Quotient.
Your second measure of success—how long your clients stay with you and how much they buy—is your company’s Client Retention Quotient, the lifetime value of your client.
Your third measure of success—how many referrals your clients make—is your company’s Client Multiplier Quotient.
The sum of these three measures of success, or Client Fulfillment Key Indicators, is your company’s Client Fulfillment Quotient, the single most important indicator of the effectiveness of your client fulfillment system.
It tells you how meaningful a relationship your client has with you.
The client fulfillment leader looks at the world through the eyes of one who is committed to lasting relationships. Without a commitment to lasting relationships, relationships that lead to other relationships with their friends and family, client fulfillment is an empty word. Without a commitment to lasting relationships, no company can call itself, or be called, a World Class Client Fulfillment Company.
Without a commitment to providing your client with continual, verifiable value, beyond his expectations, beyond what your contract calls for, beyond what is reasonable for him to expect, beyond what you even promised him, a client fulfillment leader has failed to rise to the level of world class.
Let me say it again: The integrity of your Client Fulfillment System is measured by its ability to sustain genuinely valued and lasting relationships with your clients.
Sarah and I initiated our next meeting in response to a question she asked me.
“Michael, I can understand how a client of yours could be impacted by what you’ve been saying. You’re working with your client to improve their business. There are measures you can apply to how well you perform. Did the sales, profits, or cash flow increase? Did your client spend less time while producing more results? In my case, however, given the kind of business I’m in, it’s really hard for me to think about what you’re suggesting. Obviously, I want my customer to come back to my shop and buy again and again. But, given the nature of my primary business, a retail pie store, I’m hard-pressed to think about client fulfillment in the same way as you do in your business, a consulting firm. So, could you help me look at this the way I would if I were the client fulfillment leader.”
“Great, Sarah. I can do that. Let’s take your client fulfillment system apart for the moment and look at it from the customer-who-you-want-to-become-a-client’s perspective.
“First of all,” I said, “she comes in the door. Your client fulfillment system starts right there. What does she see, or hear, or smell when she comes in the door? What are her first impressions?”
Sarah was quick to answer. “She smells the fragrance of freshly-baked pie. She hears people talking at the tables, perhaps the cash register, or pie tins being stacked together, or the dishes being cleared. Oh,” Sarah said, almost as an afterthought, “and she hears music. The Muzak I have piped into the store.”
“Great,” I said. “But, you left something out. What does she see when she walks in?”
Sarah laughed at the obvious omission. “Of course. She sees the store: the oak floors, the glass pie display cases, people; she sees people, customers, people who work in the store; she sees light, she sees…oh, you know, Michael. You’ve been in my store,” Sarah said almost impatiently.
“I know, Sarah, but it’s important that you know. That you see the store exactly as your customer would walking in the door. You, as the client fulfillment leader, need to take in the entire experience as your customer would, completely. Not that the customer takes it in consciously, necessarily. Very few customers take much in consciously. Our senses don’t work that way. You might say there’s a gestalt of sensory experience, a total experience which is all-at-once. As the marketing leader you thought about this, how to package the entire experience as a franchise, as a brand, as a unique once-only totality which is All About Pies in the mind of your customer-who-you-wish-to-become-a-client. What we’re doing here is going deeper into it. Into the orchestrated experience that you, as the client fulfillment leader, can depend upon, just as you wish your client to be able to depend upon it. ‘Ah,’ you want your client to say, ‘it’s All About Pies. I remember this!’
“Now, remember what I talked about earlier, Sarah, that you need to know what the conversion of customers to clients is. You need to know what the retention and buying practices of your clients are. And you need to know how many referrals you’re getting from your customers. Well, obviously, something has got to happen in this first moment, and from this moment on, if you are going to be able to quantify how well you’re doing. So how would you accomplish that?”
Sarah started to answer, but I held up my hand. “Don’t answer, Sarah. Because this is your first assignment. There are dozens of ways you could answer this question, all of them sound ways to achieve the objective. But, first, what’s the objective we’re trying to achieve here?”
“To start to quantify how many customers come in?” Sarah asked.
“Yes,” I answered. “But even more. This is the first step in that client’s relationship with you. Well, actually, it’s not. The first step was when they first heard of you, however that happened. Either as a result of a direct mail campaign, or from someone they know, or they passed by your store a number of times and thought to themselves that one day they would come in. But, however that happened, and we’ll talk more about that later, because it’s obviously important to the entire relationship you’re going to have with each other, this is the first step, when they come in the store, that will give you the opportunity to accomplish all of your objectives. You want to capture this moment, the name, the date, the time they came in, why they came in, what they came in for, what they actually bought, and so forth and so on. Listen, Sarah, very, very, very few, an infinitesimal percentage, of all retail companies capture this moment the way they could, and the way they should, and the way they absolutely need to do if they are going to build a world class client fulfillment system. And the first, most essential, component of the system is to be able to quantify the effectiveness of it. And now, when your customer walks in for the very first time, the first time you’ll have with that customer, you need to record it as the beginning of your history together. And that’s your first assignment.”
THE FIRST ASSIGNMENT
“So the first benchmark in your client fulfillment system is the moment your prospective client walks in the door as a new customer. You need to capture this moment. How would you do it? This is what I want you to do, Sarah. I want you to make an exhaustive list of the different ways you could capture the information you want and need from your new customer, the person who just walked in your door, for whatever reason she was called to do that, so that you can begin to quantify how well your client fulfillment system works. Think about this assignment as critical to your success. You absolutely, positively need to get this one down. The first objective of this assignment, among many, is to determine what your Customer Conversion Quotient is.
“There are three rules, or standards, for achieving this objective:
1. You cannot ask your customer to do something which will make her uncomfortable, or which will feel unreasonable. In other words, it has to make sense.
2. You cannot do something that will make the transaction you are going to conduct difficult; in short, it’s got to be the easiest thing to do in the world.
3. You can only do something that will positively add to your customer’s appreciation of your business.
“Do you have any questions about this, Sarah?” I asked.
“Well, not a question exactly, but I would like an example of how somebody else did this. Could you give me one?” Sarah requested.
“Yes, I could. But, I’d really rather you just sit with it first and see what comes on your own. I don’t want to limit your search and your creative response. Imagine that you’re not looking for answers, even though they are obviously important; you’re looking for questions. The questions, and your passion for discovering what they are, are the most rewarding part of this process, Sarah. And as you have already seen, even though at times it’s frustrating, within the discovery of the right questions to ask, something amazing that you would never have anticipated shows up, and when it does your mind is transformed along with your business.
“Which brings us to the second assignment.”
THE SECOND ASSIGNMENT
“Okay, Sarah, we now know that the first benchmark in your client fulfillment system is the moment your customer walks in the door and is greeted by all of the sensory data, in the form of her experience, that you have created in anticipation of that moment. It sounds like this: ‘My customer walks in the door for the very first time. What do I want her to experience?’ Do you get it, Sarah? The experience your customer has, walking in your door for the very first time, is an experience that you as the client fulfillment leader are charged with creating through your leadership of the process. It is a key component of your client fulfillment system. The second benchmark, then, is what happens next to your new customer. She walks in the door and she walks up to the counter, or what? What does she do then? What do you want her to do then? What would be the most natural thing for her to do then? Or another way of asking the question is, what do you want to happen here, Sarah? What would be perfect, both from the standpoint of your new customer and yourself, on behalf of your company. Clear your mind of whatever comes up immediately, Sarah. Think about this creatively for a time. Think about it.
Let me give you an absurd example of what I mean. You know those shooting galleries, where a figure pops up to be shot at? Imagine that the pop-up figure is life-size, and that the minute your new customer walks in the door a pop-up figure popped up right next to her. Bam! Do you see it, Sarah? Isn’t that ridiculous? Obviously, you wouldn’t do that, would you? Of course not, it would scare her to death! But, what would you do? What would you want to ‘pop up’ in front of your customer? What would you imagine could happen as benchmark two in your client fulfillment system that would move your new customer to the next step in a way that would completely captivate her? That’s what I want you to do in the second assignment. I want you to make a list of possible next steps. They range from the obvious, your new customer walks to the counter, to the ridiculous, a robot hands her a sample of pie. Think about this, Sarah.
Does your new customer want to be invisible? Does she want a lot of attention? Would she simply like to conduct her business, get her pie, and leave without any fanfare? Would she love it if an entire 52-person orchestra appeared and played her favorite song? Do you see what I mean, Sarah? There’s room to explore options and opportunities you have never pursued or even imagined. You’re differentiating your company from all others. Think about the frustrations people have when they walk into a store for the very first time. Think about the negative experiences they have. Pursue this question, this second assignment, as though your company’s life depended upon what you come up with. Write down anything and everything that comes to mind, no matter how ridiculous. Making the list, after all, is only the first step. The next step will be to think through all of the items on your list to begin to discriminate between the ones you’ll pursue and the ones you won’t. Do you have any questions about this, Sarah? Anything I’m willing to answer, that is.”
“Actually, no, Michael. I get the point. But what’s the next assignment? What’s the third step in this process?”
“Glad you asked, Sarah,” I said. “Because I’m hoping the third assignment will bring all this together for you in a powerful way.”
THE THIRD ASSIGNMENT
“So, what we’ve done together to this point is to determine what the content of your Customer Conversion Quotient will be. In other words, the first few benchmarks in your client fulfillment system that will touch your new customer in such a compelling way that she will want to come back to experience your store again. What’s next, of course, is to determine what the first step for your now new client will be. In other words, let’s assume your new customer has now become your new client because she has completed her first business transaction with you. You have determined what you will do to make that transaction truly meaningful, captivating, exceptional in every sense of the word, so that your new customer, now your new client, will remember it favorably. What you have set out to do, Sarah, in this once-in-a-lifetime opportunity in relationship to this particular person, your new customer, now new client, is to create an association in her, an action point in her memory that, whenever she thinks of ‘pies,’ or ‘sweets,’ or ‘bakery,’ or ‘party,’ or ‘gift,’ or ‘friend,’ whatever the words are that are connected with that association for your new customer, now new client, she thinks about All About Pies. This is the hoped-for association with your company that will cause her to come back to you and buy something else. You need to know what that next decision is, when and how it is made, what the result of it is, and begin to build a rich, harvestable store of information about this new client now demonstrating her attraction to All About Pies, and the real measure of it. What is it you want to know? That’s your third assignment, Sarah. What do you want to know about your client? And your fourth assignment is, now that you know it, what do you do about it? What steps do you take to reward her, and to benefit from her attraction to All About Pies? How much is just enough, how much is too much? And what is the medium through which all of this activity takes place? Does it happen when she walks in again? Does it happen after she leaves? Do you have an active web-based program? A membership program? An e-mail-reminder program? A gift program? A surprise-in-the-mail program? What are the benchmarks of your continuing interaction and engagement with your client to look like? Forever. Not just one step at a time, but completely, over time.
“In short, your client fulfillment system is something you will create as a complete entity, from the beginning of your relationship with your client to the end of your relationship with your client, thinking through and addressing everything you can possibly imagine doing for the life of your client, to thank her, to reward her, to acknowledge her, to invite her, to help her, to respond to her, to engage with her, to surprise her, to please her, to help her, to serve her, like no company has ever done it before.
“Your client fulfillment system, Sarah, could be thought of as an after-market program. But that’s not really what it is. It is taking into consideration every component of your client fulfillment system, the visual, emotional, functional and financial aspects of it, that can be manipulated to behave in a way of your choosing, to stimulate your client in ways she has never been stimulated before, to give her options she has possibly never thought about before, all in the form of your products and potentially rich store of services. What would those products and services be, given the business you are in, and what business are you in after all? Just your name will tell you, Sarah: All About Pies. Meaning, anything and everything to do with the subject of pies. The world of pies. Pie stuff that no one has ever heard of before. That’s your world, and now it’s your client’s world, Sarah. And no one knows more about the world of pies than All About Pies does.
“And that raises another question we haven’t looked at yet, Sarah. What is a pie? Until now, all you have thought about are fruit and cream pies, because that’s what prompted you to create your store. But what about all the other kinds of pies? Meat pies, seafood pies, and veggie pies. Pies for breakfast, for lunch, for dinner and for snacks. Every kind of pie known to woman. Why, there must be a veritable treasure trove of history surrounding the pies. Do you know what it is, Sarah? And if you don’t, who does, and how do you immerse yourself in it to become the true maven of pies, the true creator of All About Pies, to the degree you can?
“Do you get my point, Sarah? The client fulfillment leader needs to consider everything. Not just about how to make the customer happy. It’s more complicated than that. Because you can’t make a customer happy unless you make the person who is waiting on that customer happy. And you can’t make the person who is waiting on the customer happy unless you know who that person is, what they want, what’s missing in their life. And you can’t know any of that unless you ask them. And even when you ask them, if you don’t ask the right questions, you won’t get the truth back. In fact, the person who is working for you will rarely tell you the whole truth, not because they don’t want to tell you the total truth (oh, they might want to tell you the truth, but that’s even more reason for what I’m trying to say here to you), but because they don’t know what the whole truth is. And neither does your customer, now a client, know what the truth is. Nor could they tell you what they would love you to do for them, except in relationship to a frustration you have created for them. If the pie didn’t taste good. Or if an employee of yours was rude. Or if you made a promise and failed to keep it. Or if your store was supposed to be open on Monday at 9:00 A.M., but you didn’t open it until 9:10 the day they happened to come by. And so forth.
“My point is, Sarah, that your process for creating your client fulfillment system must include all of these components—the ones related to marketing, human resources, customer service, organizational development, pricing, operations, sales, direct mail, or IT, the list goes on—as One Thing. Your client fulfillment system is part of One Thing. One Total Thing from the very first moment you conceive it. It’s what is referred to by some as your business model. It’s what’s referred to by others as your business plan. It’s what’s referred to by even others as your business strategy. But whatever it’s called, it’s always and forever about client fulfillment. And that’s where we are right now in the process. It is a huge discipline, client fulfillment, at the core of your company, and it will call for all of the attention and creativity you can give it. What you are called to do here as the client fulfillment leader is to think through your lifetime relationship with your client, every aspect of it, and to mine your imagination for the most original, responsive, thoughtful impressions you can make about that client, that will, over the time she has shared her life with you, cause her to think about you endearingly, yes, lovingly, and respectfully, as one might a very close friend. Hard to do? Absolutely. But it can certainly be done. And when it’s done, it stands out remarkably from all the rest that has never done it. This is what marks the attention of the client fulfillment leader. She thinks about these things. She takes them in, deeply. She cares about these things in a way that could be almost embarrassing for most of us. She envisions doing the impossible for every single client, always. And then coming up with something else that was unthinkable. Unthinkably original. Just like the robot serving samples in a place you would never expect to see one. That’s how remarkable this client fulfillment thing could be that we’re discussing here now, Sarah. Delightfully shocking and stunningly effective. And that, dear heart, is your job!
“So, let’s go on to look at the work of the client fulfillment leader to see how many different ways you can practice this thing of ours. Okay?”
“You leave me speechless, Michael.” Sarah smiled. “Have you even noticed, Michael, that no matter what the discipline we’re working on, you always make it sound like it’s the most important one to me?”
“That’s because it is, Sarah. Each of the disciplines is the most important one, simply because we’re talking about it. They are all One Thing. Remember that. Everything you do touches everything you do. It is all One Thing. This entire conversation is all about One Thing. You can’t do anything without touching everything. And that’s why I say this with such conviction, Sarah. That to engage fully with each discipline as though your life were at stake would be the very best way to do what it is we’re doing together. Only because our lives are at stake, and not, each and every moment. Right now. Right this very moment, Sarah. Stop. Remember that? Remember yourself. Remember that? Come back to this moment. Now. And then you’ll feel the passion flowing in you. And as you feel the passion flowing in you, Sarah, you will feel the reality of this moment, not as a series of steps into the future, but as this moment and this moment alone. And then this moment will come alive.
“So let’s do that, right now, Sarah. Let’s Stop and see what happens. And then I’ll give you your homework on the work of the client fulfillment leader.”
I stopped. Sarah did too. The silence was pregnant with both discomfort and remarkable possibilities.
SELECTED E-MYTH MASTERY PROGRAM PROCESSES ON CLIENT FULFILLMENT LEADERSHIP
Your Client Fulfillment Baseline: Determining “Where Are We Now?” in Client Fulfillment
While all of the Seven Centers of Management Attention (leadership, marketing, money, management, lead generation, lead conversion, and client fulfillment) are important and deserve your attention, client fulfillment is what your customers care most about. It’s the one that gives them what they want from you—the one they’re paying their money for. It’s the ultimate proof that you did what you promised to do.
For your customers, nothing about your business is as important as client fulfillment. It’s what will put you ahead of your competition and allow you and your business to thrive.
So client fulfillment deserves special attention because it’s the only sure way into the hearts and minds of your customers. Customers don’t really care if your financial systems are in place, if your leadership is inspired, if your lead generation is attracting just the right people, or what style of management your key people practice. What they do care about is whether you manage to consistently provide them with a quality product that meets their needs, whether you’re able to get that product into their hands quickly, reliably, and at an attractive price, and whether your customer service processes are helpful and efficient. That’s what they care most about, and if you want to keep them as customers, that’s what you need to care about!
YOUR BASELINE TELLS YOU WHERE YOU ARE AND LETS YOU MEASURE PROGRESS
The key question, then, is how do you establish the very best possible client fulfillment process for your business, or more accurately, for your customers? You’re going to do this by looking at the three major processes that make up client fulfillment (production, delivery, and customer service) and evaluating the input, output, and costs for each of those processes, which will enable you to clearly and specifically document your current performance level—your baseline.
Why do you need a baseline? If you don’t know where you are now, it’s rather difficult to figure out where you’re going! You care very much where you’re going, and a baseline—by telling you exactly where you are right now—will provide the point of reference from which you can set goals and measure your progress. By documenting your current baseline and tracking changes over time, you’re going to have a clear sense of how effective your improvements to those processes have been.
That’s what this business development process, your Client Fulfillment Baseline, is all about—evaluating the major components of your client fulfillment process and establishing the baseline from which you’ll set goals and measure your progress.
WHAT, EXACTLY, IS CLIENT FULFILLMENT?
First things first. What is the client fulfillment process?
Client fulfillment consists of the product itself plus three major processes—production, delivery, and customer service—the combined result of which is to put your product or service into the hands of satisfied customers.
Production. Production is what it takes to make your product or service a reality. It starts where product design leaves off. In other words, once you’ve identified the product or service you want to offer for sale and have specified its particular attributes—what will make your product different and better than anyone else’s—production is how you actually create, make, or acquire that product or service so you can sell it.
What does production look like in your business? If you have more than one dissimilar product or service, you probably have more than one production process. The kinds of things you do in production and the number of steps there are from beginning to end vary widely from one type of business to the next. But every business has at least one production process.
Identify those systems that are part of your production process. Where does the production process begin and where does it end? It begins at the point where your product is no longer an idea, but begins to take some tangible form. And it ends when you have a complete product or service ready for sale or delivery to your customer.
If you’re in the retail grocery business, your production process might include identification of vendors, purchasing, and receiving.
The production process for a company manufacturing kits for children’s toys might incorporate testing, purchasing, assembly, quality control, and packaging.
For a carpet cleaning business, production might involve recruiting, providing necessary training, purchasing or leasing equipment, buying cleaning supplies, and of course the actual cleaning process itself.
Delivery. This is getting your product or service from your business to your customers. It begins where your production process leaves off. Delivery always has the element of transportation. During your production process, you took raw materials and added value to those materials with the end result being your actual product or service. Delivery transfers the value of that product or service to your customer.
Inbound. For an inbound business, your customers become an active partner in the “delivery” of your product or service. Even though they come to your location, you still accomplish delivery to them. For inbound businesses (e.g., grocery store, amusement park, restaurant, department store, gas station, airline, barber shop, dentist), the focus is less on the physical transfer of a product or service, and more on the experience of the transfer itself.
Outbound. With outbound delivery, the physical transfer of value to the customer is more prominent, but the experience should still not be ignored. There are two types of outbound delivery:
In-business production. You create a product or service at your location and transport it to your customers (pizza delivery, mail order businesses, manufacturers of all kinds, newspapers, magazines, door-to-door sales business). The toy kit manufacturer might deliver his product by way of mail, shipping (air, rail, or sea).
On-site production. You go to the customer’s location to create your product or provide your service (carpet cleaners, in-home nursing care, janitorial service, electricians, contractors, management consultants, etc.).
Many companies use several forms of delivery. For instance a furniture store will usually allow you to take your purchase with you like an inbound business, but may also provide outbound delivery services with their own trucks and crew or through third parties such as Federal Express or local trucking companies.
Customer service is what you can and do provide over and above the minimum requirements the customer expects as honest value for his money. Customer service is what causes your customers to perceive your product or service in a better light. The customer is not paying for these “extras,” and they are not “necessary” in order to acquire or use your product or service. A good rule of thumb is that if it’s not an inherent element of your product or service, it’s probably customer service.
It can be difficult to define what falls into this category because there are so many possibilities. Opportunities for customer service can happen whenever any part of your business interacts with a current or potential customer. Customer service might include any of the following types of service: attitude, assistance, information and advice, training, maintenance, and credit/financial arrangements.
The grocer might offer recipe cards to spotlight seasonal produce, trim meat to customers’ individual specifications, carry groceries to customers’ vehicles, or feature a nutritionist offering menu suggestions for selected food items.
The toy manufacturer might provide a toll-free number to help with assembly problems, in-house demonstrations of the full capabilities of the finished toys, or an insert that suggests games and activities for those children ultimately receiving the toys.
The carpet cleaner might provide handouts on dealing with stains, offer suggestions for protecting carpets in the future, or perhaps offer a free “carpet life analysis.”
ESTABLISHING THE BASELINE FOR YOUR PRODUCTION, DELIVERY, AND CUSTOMER SERVICE PROCESSES
Let’s have a step-by-step look at how you establish your baseline.
1. Identify the process. You’ll begin identifying the elements of your three main client fulfillment processes (production, delivery, and customer service) by listing the beginning point, the ending point, and, perhaps, some of the key components within each process. The individual systems that collectively make your product or service a reality are your production process. In the same manner, identify your delivery process—the systems that are needed to put your product or service into your customer’s hands. Finally, identify your customer service process, which consists of the systems you have in place to add additional value to your product or service above what’s promised. There are three Process Identification worksheets to help you keep track. Remember, for baseline purposes, you won’t be looking at the individual systems within the production, delivery, and customer service processes, but at the way each process operates as a whole.
2. Describe the process inputs. Identify the main resources needed for this process to function, and describe them in terms of their key system indicators. If it’s labor intensive, how many man-hours are required? If it’s a function of facilities, how much space, tools or equipment are needed to ensure that the process can do its job? If the process relies on raw materials, what sort of supplies need to be available and in what quantities? If the process is data driven, what sort of information is needed? Use the Process Baseline worksheet to track your work in this step and the next two.
3. Describe the process outputs. Identify the result, by-products, and waste products produced by the process in terms of its key indicators. Output is the final result of the process you’re evaluating. Think about why this process was put into place and what importance it has in the overall client fulfillment process. Be sure to identify any by-products (wanted or unwanted) that result from this process.
4. Estimate process costs. What costs can be directly tracked to this specific process? Remember not to include general or overhead costs in your calculations. Do your best to collect cost information that is compatible with your accounting system. Get the precise accounting information if you can, estimate if you can’t.
5. Select key indicators. Your job here is to identify a small number of revealing indicators, those that will give you the ability to monitor the process objectively. Key indicators may include such measures as total cost, cost per unit of output, numbers/amounts of key resources (like headcount, man-hours, amounts of supplies or raw materials) and output measures (such as units produced or delivered, customers served, etc.)—any indicators that let you take the pulse of the important parts of the process and, when taken as a whole, allow you to monitor it. As part of your criteria for selecting key indicators, consider the impact on your customers, the impact on your business, and the overall effectiveness of the process. Use the Key Indicators worksheet to record and track your choices.
6. Establish and document your baseline. Using the key indicators you selected, establish where your level of performance is at this particular time. Be sure to record not only the final result (dollars, time, input/output ratios, units delivered/consumed, etc.) but also your rationale and any assumptions you made in your calculations. This baseline will be the key to understanding your current performance level and to evaluating the effectiveness of changes or improvements you put into place. You’ll have the objective data to see and quantify improvements and you’ll know precisely where to get the “best bang for your buck!”
7. Track key indicators and review periodically. Assign a responsible individual the accountability for tracking your future progress against these baselines. Make it a part of your periodic review of key strategic indicators to track your client fulfillment processes quarterly, or in some regular time frame that is consistent with your business.
EXAMPLE: SWEETTOOTH, INC.
Let’s see the evaluation process in action by looking at how it worked for the client fulfillment processes of SweetTooth, Inc., makers of hand-dipped chocolates. The owner, Betty Rappel, began by working through each step of the system evaluation process. We’ve simplified SweetTooth’s actual process to make the example clearer.
1. Identify the process. To begin, Betty took an “overview” look at her three main client fulfillment processes (production, delivery, and customer service) by filling out a Process Identification worksheet for each of them. (All of her worksheets are shown at the end of this process. As you read them, you’ll be able to see how her reasoning progressed as she worked through each step.)
Betty wanted to make sure that she was seeing each of the three processes in a clearly defined way, and that she was “assigning” her various, individual subsystems to their “right” client fulfillment process. She wasn’t going to look at each one of those subsystems in detail yet, but she wanted all her production activities included in production, all delivery activities in delivery, and ditto for customer service.
She had a few systems that were difficult to pinpoint and that required some thought in order to classify into one process or another. For instance, she provides a “Certificate of Purity” with each box of chocolates. Is the certificate part of her production process or is it a customer service? Because it’s packed inside each box, she decided it’s part of production.
Now that Betty has clearly identified the parameters of the three processes, she’s ready to pick any one of them, complete the rest of the benchmarks for that one, and then do the same for the other two processes. (We’ll discuss them collectively.)
2. Describe the process inputs. With her systems identified, Betty next listed the major resources needed for each of these processes to function. She focused on the “big ticket” items, those that had the greatest overall impact on the process she was examining (the largest quantities, the most expensive elements, those that contributed most to the taste, the machinery that contributed most to the process, staffing, etc.). She worked through each phase of her production, delivery, and customer service processes to identify needed inputs using key indicator data to objectively describe them. She recorded her findings on the Process Baseline worksheet.
3. Describe the process outputs. Betty examined each process to identify its primary end result (expected outcome), any by-products (wanted or unwanted) that were produced, and any waste that was a function of each process. She also recorded these on the Process Baseline worksheet.
4. Estimate process costs. Betty found that in some areas (production for example) it was relatively easy to determine her costs. She had requisitions and invoices that told her exactly how much she had spent on materials, equipment, and floor space; and she knew the salaries of those employees who were employed in the production area. In other areas (customer service), the nonspecific nature of the process made it very difficult to pin down exact costs. In those cases, she used what data was available and came up with estimates for the costs she felt were reasonably representative of the actual amounts involved.
5. Select key indicators. At this point, Betty had quite a list of inputs, outputs, and costs associated with each client fulfillment process. And with it came a sense of accomplishment and clarity beyond what she had expected at the outset.
But she was not done yet. Next, Betty examined the information she’d collected, carefully looking at the costs and other items of significance. “Which pieces of information will be the most useful in telling me whether or not my process is doing what it’s supposed to?” Looking at the data from this perspective, Betty found the items, or indicators, that would allow her to assess the ongoing effectiveness of her client fulfillment processes. These same indicators will point her in the most fruitful directions for making improvements where they will have the most substantial impact.
At the end of her assessment, Betty selected those key indicators for each of the three client fulfillment processes. These would serve as her guideposts to success.
6. Establish and document a baseline for key indicators. Betty pinpointed the current levels of performance for the key indicators she had selected and recorded those baselines on the Key Indicators worksheet.
7. Track key indicators and review periodically. Betty was surprised that she had been able to document so many specifics about her client fulfillment processes, and she acknowledged that it was vital to the future of her business to use those baselines as a foundation for future improvements. She assigned her production manager the task of periodically tracking the production process against its baseline; her delivery supervisor was charged with keeping track of progress for the delivery baseline. Betty decided to personally track her customer service baseline. All three managers understood that their job was to not only sustain current levels in high performing areas, but also to measure progress in areas where improvements were indicated.
Example: SweetTooth, Inc. PRODUCTION PROCESS BASELINE WORKSHEETS
Example: SweetTooth, Inc. DELIVERY PROCESS BASELINE WORKSHEETS
Example: SweetTooth, Inc. CUSTOMER SERVICE PROCESS BASELINE WORKSHEETS
CUSTOMERS: LOVE ’EM OR THEY’LL LEAVE YOU!
Client fulfillment is not an easy task. Customers can be fickle and they’re not always going to tell you when and why they’re unhappy. It’s up to you to do the groundwork to determine how well you’re meeting and hopefully exceeding their expectations. You can’t afford the luxury of not providing exactly what your customers want, need, or expect. To quote noted magician Henning Nelms: “Any relationship between what you want to present to the paying public and what they want to see is purely coincidental.” Your business is no magic act. Evaluating your client fulfillment process tells you if what your customers want and what you consistently deliver are one and the same!
Systems Innovation: Analyzing and Improving Your Business Systems
Pick a system. Observe it. Evaluate it. Fix it. Watch it work. That’s the essence of the systems innovation process. There’s a lot more to it than that, of course, and some systems are enormously complex and detailed, but the process holds for any system in any business. Once you learn the basic process, you can “fix” any system, make any system better, invent a new system. And you don’t need a Ph.D. in engineering to do it. You only need your common sense and a process that walks you through what has to be done.
According to the E-Myth point of view, business development is a process of “innovation, quantification, and orchestration” and you do it through business systems. Systems innovation, then, is the leading edge of the business development process. A couple of quotes from The E-Myth Revisited illustrate the idea of innovation:
Innovation is often thought of as creativity. But as Harvard Professor Theodore Levitt points out, the difference between creativity and innovation is the difference between thinking about getting things done in the world and getting things done.
The E-Myth goes on to say:
It is the skill developed within your business and your people of constantly asking, “What is the best way to do this?” knowing, even as the question is asked, that we will never discover the best way, but by asking we will assuredly discover a way that’s better than the one we know now.
The whole idea of systems innovation is to find the better way. And here’s how you do it.
FINDING THE BETTER WAY
Every system can be improved. Do you believe it? You should. It’s the working assumption at the core of all your systems innovations. Even if you have a system that’s light-years ahead of anything you’ve ever seen and beats the pants off anything your competitors have, you can take it on faith it can still be improved. The only real question is one of priorities. Which of your systems will you work on now and which ones will have to wait a bit?
It comes down to the question of need—your customers’ needs and the needs of your business.
You know about your customers’ needs. That was the idea behind the psychographic profile you created earlier (see Part Two, Chapter Two). It’s also the idea behind product strategy and design work. The products you produce, your delivery process, your customer services, your sales processes, and your advertising all have to serve your customers’ needs.
But your systems also have to serve your business. And that comes down to economics and quality of life for you and your people. The economics require minimizing costs, maximizing profits, and ultimately increasing the value of your business. Quality of life issues revolve around creating business systems that are productive and satisfying for your people.
THE SYSTEMS INNOVATION PROCESS
Here’s an overview of the process (some of the steps are discussed in more detail following the outline):
1. Select a system for innovation. Which system? Select a system your intuition tells you needs attention.
Actually, the real answer to the question “Which system should you innovate?” is every system. You’ll take the most important systems and those that need attention most urgently first, but eventually, every system in your business should be put through the systems innovation process.
2. Observe the system on-site. See it. Watch it in action. Talk to the people who operate it. Get their experience, their “feel” for the system. Read the system documentation. Get to know the system.
3. Diagram the system. Use the box-and-arrow format on the right to make a simple diagram of the benchmarks of the system. Give each benchmark a brief name and number them in sequence. Make your diagram spacious, not cramped. You’re going to use it for a number of purposes and you’ll need the space.
4. Determine the system baseline by looking at its input/output/cost. Input includes the resources required to operate the system (staff, facilities, equipment, supplies, and information). Output is the result produced by the system plus any by-products and waste the system generates. Costs are the costs directly attributable to the system over an accounting period (month) and the per-unit costs when the system produces units of output. Quantify and describe input and output in terms of its key indicators (quantity, quality, timing, and intangibles). Having gathered this information, you now have the baseline against which you will measure future performance.
5. Analyze the system’s work flow. Work flow is the progression of activities, materials, and information into, within, and out of a system. Work flow has four components—task flow, materiel flow, information flow, and layout. Task flow consists of the steps you showed in your box-and-arrow diagram. Materiel and information flows may or may not be significant for any one system, and they may or may not coincide with the task flows—it depends on your specific business. Layout is the physical arrangement of work stations, workspace, and the traffic patterns in the working area.
Work flow includes connections with other systems in your business and even connections with outsiders like suppliers, regulators, creditors, and others. The system you’re working on occupies a place in the overall business and is interrelated with other systems. You’ll need to look at those interrelationships to understand their balance and their interdependencies, and the effect the system has on the larger scheme of things at your business.
Later in this process you’ll find a list of specific guidelines for analyzing each of the four work flow components.
6. Apply the Innovation Checklist. Use the Business Systems Innovation checklist to explore opportunities for improvement. The checklist includes a series of specific techniques for improving the work flow of any system. Some may be appropriate, some may not. If you’re inventing a completely new system, the checklist is an excellent way to avoid mistakes in system design.
7. Diagram the innovated system. Decide what improvements to try, or the best configuration for a new system, and diagram it. Again, the box-and-arrow diagramming technique works well. Take advantage of people who populate the “old” system to develop suggestions and give their experienced opinions on various ideas for innovating the system.
8. Estimate the performance of the innovated system and compare with the current system baseline. Quantify and describe the key indicators of your newly conceived system. If you want to try to generate an even more effective version, cycle back through steps 6 and 7. If the system is acceptable, go on to step 9.
9. Install and test the innovated system. This will require planning, training, probably some preliminary on-site experimentation, and maybe even a period of continued testing and observation (like the “beta test” period used in developing new computer software). When the system has settled into its normal pattern of operation, you’ll want to determine the “norms” of its operation (the normal range of input, output, and costs, again expressed in terms of key indicators), and document and use ongoing monitoring as part of your “orchestration” process.
YOU HAVE TO SEE IT TO UNDERSTAND IT—GO AND LOOK
You may already know your business systems so well you could describe them in detail from memory—but don’t do that. Most memories aren’t that trustworthy, especially when it comes to the details of business systems. But even if you have a superb memory, go look at the system. Get a direct “feel” for it. Talk to the people who operate it. Find out what corners get cut, and why. Find out what ideas they have, and why. Find out what they’ve tried that worked or didn’t work, and why. Get a sense of how people, materials, and equipment move in and about the system. See how the system relies on other systems for input and feeds its output to other systems, and talk about it with people operating the other systems.
In other words, don’t make it a study, make it an experience. If you make it a study, you’re limiting yourself to logic. Logic is powerful and essential, but your brain also works in nonlogical ways. If you experience the system firsthand, you’re feeding the intuitive and instinctive parts of your brain. You’re picking up clues and observations you might not even be aware of, but that will serve you well as you move into the truly innovative steps of the process.
BOXES AND ARROWS—SIMPLE YET SOPHISTICATED
If you’re trained in systems analysis or if you want to use any of the many excellent software programs to diagram your systems, by all means use them. But they’re not necessary, and they can sometimes get in your way because they can give you a false sense of precision and they don’t capture the “feel” of the system.
The box-and-arrow diagram gets the job done very well and it’s the simplest way to do it. Besides, unlike most other techniques, you can add your own notations and sketch in useful observations and ideas if you like. Like all the tools and techniques presented in the E-Myth Mastery Program, you adapt it to your business, make it your own, use it your way.
There are a few rules you should follow:
Make your diagrams roomy, with plenty of space to add notes.
Boxes represent work activities, tasks. They’re also called “benchmarks.”
Each box should be labeled with a word or two to identify the task. Numbering helps.
An arrow shows the sequence of tasks, how tasks are linked.
The entire system is enclosed within a larger box (representing the “black box” idea).
External systems are shown by boxes outside the “black box” and are connected with arrows showing where they provide input to or receive output from the system’s tasks.
Invent any other rules that work for you. Add any notations to your diagram that help you.
Here’s what a system diagram might look like:
WORK FLOW ANALYSIS— LOOKING INSIDE THE BLACK BOX
Work flow requires you to look closely at the inside of the black box, at its inner workings. You do that by identifying all the benchmarks, the steps, that make up the system you want to examine, diagramming them in the box-and-arrow format, and closely defining the system’s dynamics—what is called its “work flow.” Work flow is the pattern of tasks, materiel movement, information flows, and physical layout that form the system.
Understanding is what you’re after. The idea is to understand completely and in detail how the system works. You’ll be tempted to jump to solutions and new approaches as they occur to you and your people, but resist. Force yourself to completely understand the system before taking on the task of innovation. Otherwise, you’ll leap to premature conclusions and incomplete solutions based on partial information. It doesn’t take that much longer to do a complete analysis, and the end result will be systems that are significantly more effective.
YOU CAN’T UNDERSTAND ANY SYSTEM UNLESS YOU UNDERSTAND ITS WORK FLOW, AND THAT MEANS DETAILS, DETAILS, DETAILS
The trouble with business systems is that you can’t understand them, and you certainly can’t create or improve them, unless you immerse yourself in the details—in understanding them and insisting on getting them right. You can’t systemize your business looking at it through a telescope. It takes a microscope. You can evaluate a system from the big picture point of view, and you do that, as you’ve seen, by looking at its external manifestations, its inputs, outputs, and costs. But you can’t even begin to innovate your systems without looking into the innards of your business systems and absorbing both their logic and their “feel” at the most detailed possible level. You have to dig into the “black box” and there’s no way around it.
But that’s actually good news. Details are your friends. The details will set you free. When you’ve dug into the details of your systems and gotten them running like a Swiss watch (or today’s high-tech equivalent), then you step back to the big picture viewpoint and monitor your systems through their key indicators. You innovate at the detail level; you monitor at the big picture level. Get the details right and you don’t have to deal with them anymore, except when something goes wrong or when the time comes for another round of innovation.
Industrial engineers with advanced degrees spend their entire careers immersed in work flow. They use tools like PERT charts (Program Evaluation and Review Technique) and linear programming and use words like “critical path” and “time and motion study.” And, no, you won’t be doing any of those things. You don’t need to.
You’ll be taking the practical, nontheoretical, no-nonsense approach. You’ll look at the work flows of your systems and answer two questions: “What gets done by the system?” and “How does it get done?” Your tools will be your own eyes, some low-tech box-and-arrow diagrams, a floor plan, and the experience and common sense of you and your people.
THE FOUR FACES OF WORK FLOW
The heart of any system is its work flow. Get the work flow right and you’ve got a system that works right. Work flow can be complex, but if you approach it the right way, it’s straightforward. First off, you need to know the four kinds of work flow:
1. Task flow—the work activities of the system, what you show in your initial box-and-arrow diagram.
2. Materiel flow (yes, it’s spelled correctly)—the equipment, apparatus, and supplies used in the system, including information when information is part of the work and is integral to the result.
3. Management information flow—accounting data, operating instructions, key indicators, management information…information about the system.
4. Layout and traffic flow—the physical location of workstations and the traffic in and around them.
You may need as many as four diagrams, one for each type of work flow. Three of them are copies of the basic box-and-arrow diagram you’ve already drawn showing task flow. You just make copies and on one you trace materiel flows, on another you trace management information flows. You might only need one or two diagrams, depending on the size and complexity of the system. Sometimes you can draw all three on one diagram. You want to make your diagrams large and roomy so you can write notes and ideas directly on them. The fourth diagram is a map of the system—a floor plan or other sketch of the physical layout and patterns of movement of people and equipment.
These diagrams don’t have to be masterpieces of engineering or artistry. They merely have to capture the details of the system clearly enough for you to understand. They’re your working papers, and you’re the only one they have to satisfy…you and anyone you ask to work with you on it. The trick is to get the right information onto your diagrams. What information? Here are some guidelines:
Task Flow
The tasks—the benchmarks, or steps—of the system
Sequence—the order in which the tasks are performed
Dependencies—which tasks have to be done before or after other tasks
Balance—matching outputs and inputs; output from one task is input for another
Materiel Flow
Types and amounts of supplies, raw materials, components, information, equipment
Point of origin/entry in the system
Interim stops within the system
Productive stops (when the materiel is put to productive use)
Idle stops (when the materiel is between operations or in temporary storage)
Point of exit from the system or consumption within the system
Management Information Flow
Types of information, and form (paper? electronic? how transported?)
Point of origin or point of capture
Interim stops within the system
Productive stops (when the information is put to use)
Idle stops (when the information is not in use or not moving to a destination)
Point of exit from the system
Layout and Traffic Flows
Configuration and nature of the physical space
Location and arrangement of workstations (task locations)
Utilities—type, access, and capacity
Traffic patterns—movement in, around, and between workstations and other systems
People
Machines
Materials
That’s a lot to think about, but unless you go to that level of detail, you can’t be sure your systems are operating to their potential.
But take heart! Even though there’s a lot to consider, innovation is fun. It’s creative. And it’s rewarding. Approach your innovation process and the guidelines presented in the Business Systems Innovation checklist with enthusiasm. If you do, you’ll get extraordinary results.
DON’T RUSH IT!
Don’t jump to premature conclusions and innovations! Discipline yourself to thoroughly understand the system…the complete system. As you begin to look at the details of the system, you’re likely to see immediate opportunities for improvement, but don’t rush the process. Don’t make “fixes” as they occur to you. Go through every step of the work flow analysis. Get the whole picture. Then, and not before then, move on to the innovation work. That way you’ll avoid false starts, impulsive tinkering that you’ll have to reverse later on, partially effective solutions to problems, and low-yield innovations.
Remember that effective, robust systems are at the very heart of the successful businesses. And systems innovation is the only way to keep those systems effective and robust, and your business healthy and thriving, year after year. You now have the power to create and implement positive change in your business. Use it often, wisely, and well.