20 January 2011 | Dale Williams

Sales and marketing remain resistant to lean principles – but procurement must bring them into the fold, says Dale Williams.

Fifteen years ago, procurement and supply chain teams were the pioneers of the lean approach. Lean thinking involves creating more value for customers with fewer resources. Over the past decade lean thinking has become a proven way to deliver business performance. But in my 15 years implementing such programmes, there has been one constant: The final area of a business to engage is sales and marketing.

This is not a criticism. Indeed, they are often the last to be invited to the party, but until they are integrated into the application of lean thinking, its full business benefits cannot be realised. The procurement and supply chain function is key to enabling this process.

Efficient growth

More recently, accentuated by the economic turmoil of the past three years, lean thinking has become labelled as a cost reduction methodology. Without a doubt increased efficiency is one of the benefits. However, many practitioners have forgotten why the concept was first conceived: to enable efficient growth.

As we begin to emerge from recession and prepare for recovery, now is the perfect time for lean to regain its rightful place as a key enabler of growth. If applied correctly, these principles have the potential to enable firms to steal a march on the competition.

But first a change in mindset is required. The following needs to happen:

• Making the customer central – growth is not possible without customers buying your product or service.

• Focusing on customer value, not just satisfaction – gaining deep insight into what motivates and drives customers. 

• Customer satisfaction – by its nature an historical and purely tactical view of recent transactions. Important, but incomplete from a lean perspective.

• Customer value – opposite of customer satisfaction, forward looking from customer’s perspective, understanding what they will want and value over long-term, strategic view. At very heart of lean (see box at the bottom of the article).

• Understanding the true meaning of waste – many organisations believe they are taking out waste when, in fact, they are taking out cost at the expense of customer value.

Most lean practitioners have failed to understand what customers value. It is in this arena that the ‘demand side’ of business needs to be engaged.

Understanding value

Sales and marketing teams are normally best placed to lead a programme to determine what customers feel – what motivates them, what frightens them, their issues and challenges and the pressure they feel from their customers. This is a key element of enterprise-wide lean thinking implementation.

In general, most attempts at lean thinking have little or no link to customer value. There is an inherent risk with this approach – cost is taken out of the business, but at the expense of customer value. While it may deliver bottom-line benefits in the short-term, the ability to grow over the long-term is compromised.

The core purpose of lean thinking is to enable efficient growth, and the final arbiters of whether a business grows or not are its customers. So when a business or product meets or exceeds all of the criteria that customers value, growth can be achieved.

It is equally true that the people charged with achieving the growth are in sales and marketing. So success in implementing lean across the whole organisation means that everybody wins. There is a direct alignment of the goals of customers, sales and marketing teams and operational teams.

Satisfaction vs value

It is a common misconception that systems for measuring customer satisfaction can act as surrogates for understanding customer value. A customer satisfaction conversation is very different to a customer value conversation. The table below sets out those differences.

In essence, a customer satisfaction conversation reveals how well a business is performing today, but it does not establish if what it is doing is right. As somebody once said: “There is nothing more wasteful than doing the wrong things really well.”

Gaining customer insight

To grow in a competitive market, it is crucial that companies have an insight into what customers value. This requires a significant investment on the part of any business. The only way to gain true insight (as opposed to information) is to spend time with customers and listen to what they have to say.

When was the last time anybody in your business spent time with your customers, with the sole intent of trying to understand them better? Ironically, the people who spend most time in front of customers – the sales team – are trained to convince them to come around to their way of thinking. This is not an effective means of gaining customer insight.

One of the tests of insight is to ask yourself (or your account managers): “Could I present the strategy of my key customers to my colleagues?” If you don’t know where they are heading, how can you know what will be important to them in the future?

This need to develop a core competence in understanding customer value puts procurement and supply chain professionals in a unique situation. They can act as the pivot point between the operations teams in their own businesses and the sales and marketing professionals in their suppliers’ businesses. The skills are developed in ‘reverse formation’ – dealing with suppliers to learn what it really means to engage in a dialogue about value, and redesigning a process to deliver that value in a sustainable manner.

As we move to a recovery mindset, it is an ideal time for organisations to take a fresh look at the real benefits lean thinking can bring.

The advice for leaders is to take a demand-led approach. First, take personal ownership of applying lean thinking across all business processes, not just operational areas. Second, instead of asking operations teams to lead the charge, give the task to the sales and marketing teams, supported by procurement and supply chain. The focal point for lean thinking should always be the customer – and nobody is closer to the customer than they are.

☛ Dale Williams is director, corporates lean, KPMG Performance & Technology, the consultancy arm of the audit and advisory firm