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Customer value, what is, and how you define it?

The journey to transform your business into a continuous improvement enterprise should start with the definition of value. The CI business management model defines the value of a product or service from the customer’s point of view. How much your product or service is worth for the customer? What are the expectations?

How you find your customer expectations?

Only the customers themselves can tell you. There are a couple of ways to get their input, talking with them, or using social media. The best time for a conversation is right after they received the product or service. Ask about their experience. What do they like? Do they have any suggestions? Listen to what they have to say and watch their demeanor. Social media accounts are another way to receive feedback from customers. Review the comments and ratings often. You can also create polls to survey their opinion.

Customer Value Definition

The information from these three different sources will give you the value definition from the customers’ point of view. Value definition is a critical piece to start your continuous improvement quest. You will use it to classify each process as value-added or non-value-added. Value-added activities are those that transform input into output or change materials or information. In other words, the customers are willing to pay for it. Everything else is non-value-added or waste.

Example of value-add activities

When you go to a restaurant, you expect to receive in a reasonable amount of time the plate you ask for. You also expect that the staff follows any special instructions like cooking the meat the way you request it. You will pay for the food and the service without hesitation. If the restaurant messed up with your plate, that is a defect. Now they have to prepare a second plate, which is overproduction. Both things are waste or non-value-added activities. I bet that you, the customer, are not willing to pay for them.

Businesses need to complete various processes that are critical for operation but do not add value to the customers. Examples of necessary non-value added activities are hiring, payroll, and month-end financials.

Customer value and your business

The entire flow from the customer order to the product or service received is drawn using a value-stream map (VSM). VSM is a special type of flow chart where you can visualize the flow of information and materials. This map is a tool that allows you to see waste and plan how to eliminate it. How to create a VSM will be the subject of a future post.

The priority of continuous improvement is to eliminate waste. Waste elimination will create faster and bigger results. Second, it is to challenge and reduce the necessary non-value-added activities. Minimize the quantity of non-value-added steps will further improve flow and reduce costs. Finally, you will work on optimizing value-added steps.

1 thought on “Customer value, what is, and how you define it?”

  1. Reblogged this on The Strategic Sync by Fahim Moledina and commented:
    The post below brings about a lot of questions about process and value. Value-stream maps are often the key to understanding customer value when continuos improvement and process mapping activities start there needs to be a goal when optimizing processes. Before automating processes in an organization it is important to understand the process completely ad how it provides value to stakeholders. Understanding what makes your customer move is important and most customers are not focused on the process but are concerned about the outcome. I have often heard from clients that the project doesn’t matter to them the product does, but to get to the product there are many steps. Still, it is important to be able to highlight the processes that are truly essential in bringing the customer value and which ones are waste or bring minimal value to maximize the ROI. Keeping the ROI maximized is becoming more difficult now with resource constraints and accelerated schedules becoming more common.

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