Business writers coin new concepts from scratch, while others use the tenets of Six Sigma as a jumping board from which to develop these new ideas and theories. You’ve read literature about innovative tools that sprung from Six Sigma or have been blended with Six Sigma. What results is a new set of tools waiting to be introduced to business circles.
Customer Value Creation
One such concept that has come up in sales and marketing is that of creating value for the customer. It sounds rudimentary enough but the dynamics are a little less understood. For example, Paul O’Malley who wrote an article in the Systems Thinker (Pegasus 1998, Vol. 9 no. 2) said that companies who are successful know how to create value not only for its customers, but also for its employees and investors. He goes further by saying that these three groups have interests that are intertwined. This means a company cannot create value for customers unless it also creates value for the two other groups.
It is O’Malley’s view that the group that is most in need of a company’s attention and resources are its customers. But to do this, it is essential to recruit the right people and to give investors attractive returns. Without motivated employees and loyal investors, value an impossible goal to aspire for.
Customer value is created when customers believe that the product or service they purchase will be useful to them consistently and that they can rely on this product or service indefinitely. How can this be achieved? Through proper employee training and sound manufacturing concepts. Employees must be drilled that the customer deserves value upfront so they must do their jobs to make sure customers keep coming back.
The process of keeping customers happy involves everyone and everything in the company. When a new product is developed, the units responsible for the product’s design, creation, packaging and shipping must inspect the product and test it frequently so that by the time it reaches the customer, it is exactly what the customer wants. This is where using Six Sigma concepts and measuring tools come in handy. All the different processes involved in the product launch come under the scrutiny of Six Sigma.
The same can be said for selling and marketing activities. The company will have to focus its energies to making the customer realize that they made the right choice. A different set of processes is involved; again, Six Sigma tools can be used to measure the success of customer value creation. These concerns reflect how successful a company was in creating value:
- rate of repeat business
- number of merchandise returns
- number of complaints that the product is not functioning correctly
- number of misrepresentation claims (because of misleading advertising)
- product market share compared to competitor products
- referrals
Inspiration from Six Sigma
Gary Plaster and Jerry Alderman talk about creating value for the customer by drawing inspiration from the principles of Six Sigma and then coming up with their own model for customer value creation (CVC). They take their customer value analysis (CVA) and align it with operational excellence (OE).
Plaster and Alderman explain, “The principle behind OE is that you must have an analytical and process-based approach to execute growth. CVC combines these two core ideas to leverage the quantitative rigor and process-based mentality of Six Sigma with an outside perspective on value to drive profitable growth”, (Beyond Six Sigma: Profitable Growth through Customer Value Creation, J. Wiley & Sons, 2006).
For business students and independent thinkers, the book by Plaster and Alderman is a testimony to the widespread success of Six Sigma. They refer to it frequently in their efforts to explain CVC. Two chapters discuss the outside-in inside-out perspectives – two arguments that have become popular of late. Chapters 2 and 12 are dedicated to Six Sigma and the final chapter is a discussion of CVC supporting tools. We strongly suspect that these tools actually rhyme with Six Sigma tools and methodologies.
One proof that Six Sigma will be a main staple of business for the future is that despite the fact that it has been around since the 1980s when Motorola first invented it and GE perfected it in subsequent years, it is still very much alive among discussion circles. And judging from the thousands of business titles published every year, it looks as if Six Sigma will be regarded as a tool that has withstood the test of time.
Six Sigma will continue to serve as a complimentary approach to whatever new business theories are brewing at the moment; that is, if it isn’t the main dish.
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