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Lean Service Is Innovative Service Is Lean Service Is . . .

#16 OE Newsletter

OE Newsletters

The hallmarks of service businesses include high levels of complexity, low levels of process and product visibility, and a dual reliance on people skills and technological prowess. That’s all the more reason to integrate the human and technical principles and practices of lean management in the development and operation of service and administrative processes.

Insurance and financial services businesses, for example, find themselves in a fast-paced, ongoing battle to lead the pack, or simply to keep up with innovation in online banking, trading, payments, currency, and insurance. But we all know that lots of technology is certainly no guarantee of a reliable, simple, value-rich customer experience. Lean can help, but how?

Lean at work in a major affinity insurance company

At a major European provider of affinity insurance—branded insurance products that protect credit cards, mortgages, cell phones, consumer products, and more—a complex stream of incoming policies, inquiries, and claims was becoming a tough challenge due to rapid growth and increasing volume.

Customer satisfaction was in jeopardy. The company had invested in software to automate document sorting and reduce process lead time, with the goal of improving productivity and mitigating the backlog of work. What they found, however, was that although the software might eventually help, to reduce the work-in-process the processes themselves had to be improved first.

So they engaged in a broad lean service transformation, which began with getting a handle on their current demand and mapping their value streams. They developed standard work for various operations, designed continuous flow where possible, and, critically, made work visible on a flow management board. Expectations and workload became clear and transparent, and the backlog began to plummet. As it did, the amount of “failure demand”—or demand from unsatisfied customers making additional calls or sending follow-up emails—plummeted as well, driving the backlog down further and reducing work in process by 80%. That’s in the context of 15-20% annual growth in volume. Claims processing lead times were cut more than 50%, and the experience for both customers and staff greatly improved. Lean is keeping this premier provider competitive and positioning it to enjoy future growth.

Innovative service offerings mesh with lean and lean IT

The travel sector is also in constant flux, with customers demanding more and more tailored options at unprecedented speed and low cost. Disruptive business models powered by technology have all but supplanted traditional travel services. As with every service business or process, travel service providers need to get lean to streamline the flow of value to the customer.

Amadeus, a European-based company that operates in 195 countries, has taken up the challenge. The company “keeps the travel sector moving” with a business-to-business portfolio of technology solutions for its travel industry clients. In a research report entitled Cleared for take-off, Amadeus publicized its focus on lean IT as an essential enabler for its business model.

The report notes some ways that Amadeus is using lean principles to work with customers to “co-create, from standardized components, a great variety of offerings—offerings made to order, and not to forecast.” For example, before starting a project, the Amadeus team checks that all resources are available and allocated to complete the entire process. The project team, rather than a manager, has the authority and responsibility to decide its own course and the resources it needs. And inboxes are a thing of the past, with the team working in one-piece flow instead. Moreover, Amadeus credits lean with helping to ensure its objectives are aligned with those of its clients in the travel business, so that as a supplier they are helping clients meet their own goals.

Human resources innovation that depends on lean thinking

The online platform Zenefits has been making inroads into human resources territory using innovative lean concepts as it helps small businesses administer all their employee programs—including benefits, payroll, onboarding, time and attendance, and more—in one free, web-based software offering.

Their revenue model? By functioning as a portal to different insurance offerings, Zenefits doubles as an insurance broker, allowing the company to earn money from the insurance companies that provide coverage rather than from the companies that use their services.

One of the fastest growing startups ever, Zenefits has also encountered its challenges. Their offering was recently ruled “unfair competition” by the commissioner of the Utah Insurance Department, and it has struggled with regulations in several other states. They do pose a threat to the existing insurance brokerage industry. But they are growing so fast precisely because they provide more value, and that’s the essence of lean thinking.

As quoted in an interview in the New York Times, Zenefits founder and CEO Parker Conrad said, “The problem that we solve is actually much more foundational than the insurance, because the problem is that businesses with less than a thousand employees have 20 different systems related to that employee record, and every time you hire or terminate someone, you need to set them up or remove them in 20 different places. It’s all this administrative work that, if you can connect all these things up, all goes away.”

What is lean, if not a customer-centric approach designed to liberate businesses, workers, and customers from ineffectiveness and waste? And indeed, according to current employees at Zenefits, agile and lean methodologies are at work there. Employees “have the ability to iteratively improve the product and ops flows” and there is “extremely little red tape because the company thrives off of individual initiative and lightning-speed team building.

Key takeaways

  • Lean improvement strategies, lean IT, and innovation go hand in hand in hand when it comes to creating lean service businesses and lean administrative processes. So whether you are working on new start-up businesses, spin offs, or ancillary services or improving administrative and support processes, plan on bringing to bear expertise from all three areas of practice.
  • Lean is a people-centric management approach that improves the experience for staff as well as for customers. And because service businesses and processes are generally more people-centric, happier staff intensify the positive impact on customers.
  • To apply lean principles in service operations, understand first that service demand profiles and processes can often be much more complex than in manufacturing processes. Making work visible is a key to improving it.

Ask the Consultants

Q. Our company has had some education in TPM and made some strides in getting TPM off the ground, but we’ve never attended a conference specific to the topic. What would be the benefits?

A. As Ellis New puts it in this two-minute video, improvement is a social as well as a technical concern.

That also informs lean transformations. TPM is an enabler to Lean, and the conference addresses it as an integrated initiative. Covering a range of equipment and process reliability, the conference provides a phenomenal opportunity to network with people who are also on the journey, Ellis says, and to share experiences and learn from those who are further along.