Chapter 1. Introduction
2.2 The High-Level Process
2.4 Summary
References
Additional Reading
2.1 THE CUSTOMER
The traditional definition of a customer is “someone who buys what the supplier (company) sells,” but in today’s global competitive market, the traditional defini- tion is neither a precise nor a complete definition. A better definition is “a cus- tomer is a person who a company/supplier tries to understand (e.g., their reactions and expectations) and to provide with products/services that meet the customer’s needs.” This much broader definition is far more useful in today’s increasingly complex business environment with its wide variety of customers. A customer does not see or care about a company’s organizational structure or its management philosophies. A customer only sees the products and experiences the services offered by that company.
A company/customer relationship can be very complex. In the following list, who is a customer of a pharmaceutical company?
• The patient, who uses the medicine
• The pharmacist, who dispenses the medicine • The physician, who prescribes the medicine
• The wholesaler/distributor, who is an intermediary between the man- ufacturer and the pharmacy
• The Food and Drug Administration scientists and officials, who approve the use of medicine
• An insurance company that pays indirectly for the medicine
The answer is all in the list are customers. Therefore, a pharmaceutical com- pany must understand the requirements (needs) of all of these individuals and institutions.
company’s products and retailers. A customer goods company can influence these customers in two ways:
• The company wants retailers to carry its products, to allocate substan- tial shelf space to them, and to promote the products in advertising pieces.
• The company wants to influence customers to select and use in its products.
This presents a very complex company/customer relationship. The funda- mental relationship between a company and its customers is not based on the exchange of products or services for money. It is actually based on providing val- ued products/services that meet customer needs in a timely manner and at com- petitive prices.
“What is a business?” If contemporary managers, executives, and economists were asked this question, most likely they would answer, “The mission of a busi- ness is to create shareholder value.” This answer is neither irrational nor unrea- sonable, but nonetheless it is “wrong.” Why?
Because shareholders provide capital that produces an income stream, share- holder concern must be central to an enterprise. Yet, exclusive focus on capital and those who provide it can be a distraction in a company from what really counts. Fundamentally, every company is in the same business—the business of “identi- fying and meeting customer needs.” Customers define product/service needs that a manufacturer/supplier delivers. Customers can be divided into three groups: internal, external, and stakeholders.
Note: Unfortunately, shareholder concern was not a primary concern during
the 1960s and the 1970s. Many executives ran their companies as if the companies were their personal businesses. These executives followed business strategies that mainly boosted their egos and personal incomes. Many received a nasty surprise in the takeover wave of the 1980s.
Internal Customers. Internal customers are a part of the total process if they receive internal/external output and utilize it as an input in their process to sup- port their customers. These customers may be another internal customer or the external ultimate customer (the ultimate user of a product/service).
External Customers. External customers are not only product/service users, but also governmental agencies (e.g., regulators and law enforcement agencies) and the public (or community). An external customer could be domestic or for- eign. Most business revenue is generated from external customers, making them the most important customers.
Stakeholders. Stakeholders sponsor the project. Periodically, the project team reports project status to stakeholders. Stakeholders impact the process or the process impacts them.
Customers and Critical to Quality Characteristics
If a company is working on something that is aligned to its strategic business pri- orities, then any improvements made for an internal customer will ultimately lead to a quantitative improvement for external customers. The product/service per- formance characteristics must also satisfy customers. Additionally, a supplier must understand the needs of customers. Customer-needs information can be collected by surveys, e-surveys, focus groups, etc. Information collected must be translated into comments, issues, and specifications. These comments, issues, and specifications then become customer CTQs. A CTQ is a product or a service char- acteristic that must be met to satisfy a specification or a requirement(s) of a cus- tomer (i.e., the recipient of a final or an end product/service, generally an external customer). A CTQ may also be referred to as project Y [as in Y = f(X)]. The fol- lowing example relates CTQs to customers.
Suppose that your company produces software packages for sale to customers (external). To define design specifications and develop the software, you must understand the CTQs of the customers. You also must understand time-to-mar- ket, total software development cost, and on-time delivery of quality software (in terms of defects) to meet customers’ needs. Customers (internal and external) can be identified as:
• Purchasers/users of the software
• Stakeholders imposing requirements on the software: – Shareholders
– Regulators
– Government agencies • Users of internal software
– Business partners
Once identified, customers can have different requirements that must be con- sidered in determining CTQs. Therefore, to ensure that the “proper” requirements have been considered when collecting customer data, all possible customer and stakeholder groups must be identified. Internal stakeholders often speak for exter- nal stakeholders (customers); their process requirements must be met if the busi- ness is to be successful. Key internal stakeholder groups and their requirements could include:
• Legal—Regulatory agencies
• Compliance—Government agencies
• Human Resources—Occupational Safety and Health Administration (OSHA), Equal Employment Opportunity (EEO)
Therefore, the term “needs” (requirements) must consider stakeholder groups and customer segments to accurately determine CTQs.
CTQs Defining Process
Defining customer CTQs is a three-step process:1identify, research, and translate (Figure 2.1). The process delivers:
• Prioritized list of internal and external customers and stakeholders • Prioritized customer needs
• CTQs to support needs
Identify: Customer—As presented in Figure 2.1, and with the types of cus- tomers identified with examples in the previous section, the next step in the process is to prioritize the customers. The highest priority goes to the external (ultimate) customer, prioritized as:
1. External customer (ultimate customer)
2. Individual/groups that have direct or indirect responsibility for the product, service, or process:
– Business shareholders – Internal/external regulators – Government agencies
3. Internal/external service groups and material suppliers: – Business partners
Listening to customers and collecting pertinent data that reflect their input are important. Internal customers often develop solutions for the ultimate cus- tomer and their requirements. Internal customer departments could include:
• Business development • Financial
Identify è Research è Translate
• Personnel • Legal
• Safety and security
Example 2.1: A CTQ Process—House Construction Proposal
The process is a house construction proposal from a general contractor to an external customer (ultimate customer). An architect will develop a house design package for a general contractor (internal customer). The package will include a house design, drawings, and construction cost estimates. The general contractor will prepare the final document for an external (ultimate) customer.
Identify Internal and External Customers: Internal Customer(s) • • • • External Customer(s) • • • • Identify CTQs:
Sample CTQs: House Design Quotation
• House design to meet customer requirements • House layout to meet space requirements
• House construction to meet budget and schedule requirements •
• • •
Once customers have been identified, the next step is to research the cus- tomers.
Research Customer—Before beginning this step, first determine how well you understand and listen to your customers. Do you have little or no information or do you have detailed information? Are you confident about the quality of your customer information? If data are historical, answer the following:
• What do you know about the data?
• What is your level of certainty that your customer data represent the opinions/needs of the majority of your specified customers and/or groups?
• Are your data reliable and representative of all your customers?
A natural progression of this step is that you might start with no information, but conclude with quantified, prioritized customer needs and expectations, as well as information about your competitor.
The three elements of a Research Customer process (Figure 2.2) include: • Collect data.
• Analyze data. • Prioritize data.
A basic guideline for Research Customer is presented in Table 2.1.
Note: A detailed discussion of data collection may be found in the Data Collection Plan and Data Presentation Plan sections of Chapter 3 (Measure).
Collect data. Based on the available information, determine if additional information is needed, e.g., to fill “data gaps.” Then develop a data collection plan to close the gap(s) between “where you are” and “where you need to be.” Data can be collected in several ways, e.g., sampling methods include:
• Listen to sales representative, service representative, and customer complaints and to customer compliments.
• Analyze product returns. • Perform a direct contact survey. • Analyze contract cancellations.
• Survey, e.g., with direct mail questionnaires and e-questionnaires (website).
• Analyze customer defections. • Interview new customers. • Interview focus groups.
Analyze data. As data are collected, a high level of data analysis will indicate: • If any additional information is needed
• If complaint data indicates the cause of dissatisfaction (which could facilitate collecting the additional needed data)
Sometimes the initial analysis reveals that additional information still is needed.
This high-level data analysis will identify customer requirements and help the team to develop a detailed plan to validate and translate “the voice” of the cus- tomer. As data are collected and analyzed, understanding the following is critical:
• What percent of the customer base is covered by data collection? • What level of customer needs will be satisfied by the selected priorities? • How reliable are the data?
• How is information collected, analyzed, and prioritized?
Identify Î Research Î Translate
Customer Needs
Î Collect Î Analyze Î Prioritize Î
Sampling Methods – Listen Sales representative Service representative Customer complaints – Interviews – Surveys – Websites Sampling Methods – Level of qualitative information – Quantitative information – Need for any
additional information – Develop hypothesis
and test through data analysis
Sampling Methods – Interviews – Surveys – Websites
• What competitor information has been collected?
• What level of “gap” analysis is performed prior to collecting any data? Collected data may be either qualitative or quantitative or a combination of both. Collected data could also be defined as independent or dependent variables. To establish a relationship between dependent and independent data, the project team may have to develop a hypothesis and then test it. The hypothesis concept is discussed in Chapter 4 (Analyze).
Prioritize data. Customer needs should be translated into product/service functionalities, which can be classified into five categories:
Table 2.1. Selecting the Appropriate Research Methods
Input: No information (data)
Research Method: Analyze information requirements. Interview individual/focus groups. Listen to customer complaints.
Output: What you get: Customer needs and wants providing general ideas; combination of qualitative and quantitative
information; unprioritized
Input: If preliminary customer needs and wants are known Research Method: Interview individual/focus groups.
Analyze underlying needs and develop specific questions.
Output: What you get: Customer needs and wants — Clarified; more specific; prioritized
Customer input to list — Best in class; may be a competitor
Input: Qualitative; prioritized customer needs and wants Research Method: Survey — Face to face; regular mail; electronic mail;
telephone
Questions based on most important requirements Output: What you get: Quantified and prioritized customer needs and wants
• Expected—Satisfaction derived from expected functionalities is directly proportional to the availability of these functionalities in the product/service, i.e., when they are fully functional.
• Required—Some customers have a specific requirement of function- alities. If required functionalities are not up to the required level, cus- tomers become dissatisfied. Yet, if the required functionalities were above the customer’s required level, customer satisfaction would not increase, e.g., a mainframe computer’s required up-time is 99%; dur- ing the last 5 days, up-time was 99.5%, but the customer/user satis- faction level did not increase.
• Optional—The customer is more satisfied if optional functionalities are added to the product/service, but the customer is not less satisfied in the absence of them, e.g., a five-speed standard transmission in an automobile instead of a four-speed standard transmission.
• Indifferent—If advanced functionalities were provided in a product/service, only a small fraction of customers would be inter- ested in using these functionalities. These functionalities generally do not change customer satisfaction values, e.g., Microsoft® Office with a special feature such as Excel Solver.
• Reserve—Sometimes reserve functionalities cause dissatisfaction, particularly if they negatively impact the customer’s plans or activi- ties. Customer satisfaction then decreases, e.g., some vacation resorts provide computer games, but the parents prefer that their children engage in personal interaction.
Once the customer’s information is prioritized, going back to the customer to validate the assigned priorities is critical. Communication with a customer might include interviews, surveys, and a website.
The Research Customer process is presented in Figure 2.2. In summary, at a minimum, Research Customer is a three-step process. If time permits, use addi- tional steps to achieve a better understanding of customer “needs and wants:”
• Selecting the right tool to collect customer information is very impor- tant. If no customer “needs and wants” information is available, talk to or interview focus groups and evaluate: “What is important?” and “What are customer needs and wants?”
• After obtaining the preliminary customer “needs and wants” informa- tion, interview additional customers from different geographic loca- tions to help develop specific requirements. Then prioritize the “needs and wants” requirements.
• Survey customers. Commonly used methods include:
– Face to face – e-mail
– Electronic – Mail
– Telephone
Quantify the survey results and then try to analyze the competitor’s information. The conceptual relationship between customer satisfaction and product/serv- ice is presented in Figure 2.3. This concept is based on Kano’s theory. The line passing through the origin at 45 degrees represents the situation in which cus- tomer satisfaction is directly proportional to the functionality of the product/service, meaning the product/service functionality is meeting customer needs. The customer is more satisfied with a more fully functional product/serv- ice (per customer needs) and is less satisfied with a lesser functioning product/service. According to Kano’s definition, such requirements are known as “one-dimensional” requirements.
In Figure 2.3, if the customer satisfaction and product/service relationship resides in the first quadrant, the product/service will be unacceptable to cus- tomers and the business will not survive. If the product/service is functional and a good percentage of customer needs are being met, then the product/service and customer satisfaction relationship will fall in the second quadrant. However, to produce a fully functional product/service, a business must implement a contin- uous improvement program. A continuous improvement program will move the product/service and customer satisfaction meeting point into the third quadrant as shown by the dashed arrow. Yet, if the product/service is functional, but cus- tomer satisfaction is low, then the product/service and customer satisfaction rela- tionship will fall in the fourth quadrant. This situation indicates the business is on a critical path for survival: the combination of customer satisfaction and prod- uct/service would need to follow the dashed-line arrow in the fourth quadrant.
Using an automobile as an example, priorities in a competitive market include:
• Automobile reliability and safety • Driver and passenger comfort
If the automobile (the product) meets these requirements, it would be in the third quadrant. If the automobile is reliable and safe, but the driver and passen- gers are uncomfortable, the automobile will fall into the second quadrant. It is now on a critical path. For the business to survive, significant effort will be required by the business to make the automobile fully functional and to fully sat- isfy customers.
tionship of product and customer satisfaction will reside in the fourth quadrant. In this case, improvement in reliability and safety of the automobile will need a continuous improvement effort for survival of the business.
Translate Customer Information—The third step to obtain customer CTQs is to translate the customer research data. The relationship of this step to previous steps is presented in Figure 2.4.
Ensure that all information (e.g., from team members and customers) is in the “same language,” i.e., the information is presented consistently. Now compare research output with customers’ suggested “needs and wants” and prepare a gap analysis. This gap analysis will lead to customer CTQs.
Note: “Same language” mainly refers to applicable measuring units, environ- ment, and constraints. As an example, for an automobile in the U.S., gas mileage is
Product/Service fully functional Product/Service not functional Satisfied customer Unsatisfied customer Top priority (competitive market) Unacceptable (business will
not survive) Critical for business survival Future direction Needs continuous efforts Future direction 1 2 3 4 Quadrant 1 12Quadrant 2 Quadrant 3 34Quadrant 4
measured in miles per gallon, but in most other countries, gas mileage is meas- ured in kilometers per liter. In some countries, automobile traffic is disciplined, i.e., it follows specific rules, while in other countries, it does not. Gasoline used in one country may be more environmentally friendly than the gasoline used in other countries.
If the customer information needs translation into “your language,” follow these steps:
• Identify key issues—Take these issues and group them into categories or themes. Do not try to force customer comments into the categories you have created. List customer comments separately if they do not fit into a category.
• Write CTQs from the key issues—Document customer needs that represent issues. Sometimes a customer need may become part of a structural tree that represents an issue, which will lead to a CTQ. Ensure that the customer need is identified as a specific and measur- able requirement and that it is understood by the customer and the project team. The team must have an unbiased approach in translat- ing the customer needs.
Sample translations of customer data are presented in Table 2.2. As analyzed data are translated into CTQs, it is critical to have feedback from customers. Customer feedback can be obtained from numerous sources:
• Surveys • e-mail
• Regular mail • A website
Customer inputs have now been identified and segmented into their needs/requirements and wants and have also been translated and understood as customer CTQs. Next in the process is for the project team to understand the high-level process, but first consider Exercise 2.1.
Exercise 2.1: A Class Project
Build a house according to customer needs and wants. The customer negotiates a contract with the general contractor. The architect works for the general contac- tor. The architect designs the house and develops drawings and material and cost
Identify è Research è Translate
estimates. The general contractor obtains a loan from a bank to build the house. The bank is a separate institution. Provide information for the following:
1. List internal and external customers. 2. Determine customer “needs and wants.” 3. Recommend a method of data collection.
4. Assuming that the data collection method is a survey, brainstorm a list of questions to ask the external (final) customer.