How to reduce costs, improve customer service and make more money in the service industry with Lean
Updated: Feb 9
Lean has a long history in manufacturing, but over the last couple of decades, we’ve seen it increasingly applied to the service industry.
Lean is about looking at processes from the customer’s perspective and taking out ‘waste’ - activities that add no value for the customer. And companies investing in Lean have benefited from reduced costs and happier customers.
In this blog post, we take a closer look at the ins and outs of applying Lean to the service industry.
How does Lean differ for manufacturing and for services?
Lean is easy to apply in the manufacturing industry. You have a product that is being produced over and again, where all the customer sees from placing their order, is the finished product right at the end of the process.
In the service industry, there is no physical product going through the process. Instead, it’s the customer
who goes through the process. The customer sees and feels each transaction, from enquiry to service delivery, with each step being slightly different from one customer to the next. If there is a defect in the manufacturing process, the customer won’t see it as it will be reworked before it gets to the customer. But, in the service industry, defects or delays can impact the customer directly.
For example, in the healthcare industry, an error in processing the results of a blood test may mean a much longer wait time for results. Or, in the hospitality industry, if the waiter writes down your food order incorrectly, you may not get your food until long after everyone has eaten. The point is, the processes are much more visible and have a greater impact on the customer.
The last point to make here is that in the service industry, waste is much harder to spot. So, companies have to map out processes, analyse each task, and talk to customers about their touch-points so they can see how the processes actually work.
Why should service companies care about Lean?
Today’s marketplace is marred by intense competition and changing consumer perceptions. People have been conditioned to expect high levels of service, so it’s crucial that your company is responsive to their needs.This requires maintaining high standards at each customer touch point, and being flexible to meet the wide variation of needs of customers.
One issue for service organisations is customer facing and back office operations not being responsive as customers expect. They can be slow, error-prone and sometimes show little empathy when communicating with customers, who have varying needs. Think about your own experience of interacting with the healthcare system or with your broadband provider.
The beauty of Lean is that it looks at your processes from a customer perspective by shining a light on their needs, eliminating errors and delays, and guiding employees to show more empathy when the need arises. This all leads to improved customer satisfaction, more referrals for your services, and growth for your business.
What are some examples of Lean services in action?
Let’s take a look at a couple of our client examples.
First, think about a busy call centre of a retail bank. The volume of calls goes up and down on a cyclical basis. If the company doesn’t handle the extra capacity at peak times, customers can get frustrated. How many times have you tried calling one of your own service providers (your bank, utility provider or broadband provider) only to be put on hold for an excruciatingly long period time?
One solution is for the company to increase staff at peak times so you never miss a beat. But what about when volumes are low? People won’t be doing much. Through a Lean project, a number of solutions include cross-training different departments to bring them into the main service when the volume is high. Outcomes can include reduced staff and overhead cost, more efficient processes, engaged employees, and most importantly - happy customers.
Here’s another client example from a regional office operations of a lettings agency. Customers had been complaining that there were problems with completing the agency lettings application forms. A Lean project carried out customer interviews and identified many issues with application forms. Forms were too long, questions were difficult to understand, and the overall process was time consuming. Lean process analysis was also applied to the office-based process where application forms were received.
This was a real eye-opener for our client, as the Lean methods found that even though the process had been in place for many years, its staff and customers were running a process that contained lots time on waste. This included errors, duplication, missing information, unnecessary approval routes, and costly real estate being used as storage for paper forms over ten years old.
The Lean project pulled cross-functional teams together representing customers, IT, compliance and application form processing staff to identify solutions to overcome the problems identified. Solutions included simplifying forms by removing duplicate questions, replacing business jargon with simpler vocabulary, and error-proofing office-based tasks using drop down selection menus.
These changes, whilst relatively small individually, made a big difference for customers, employees and the business when added together. Outcomes include increased ‘right-first-time’ form completion and office data entry, a reduction in delays and labour costs, and real estate freed up to advertise more properties. The result? A much quicker, smoother and efficient process for customers, staff and the business.
These are just two examples of Lean services in action. To find out more you may wish to read one of our recent case studies:
How a national high street estate agency used Lean diagnostics to create savings of £590K in eight weeks
Lean diagnostics drives insurance claim process transformation: A Case Study
What are the most common obstacles of implementing Lean?
The first challenge is learning how to use the Lean tool set correctly. Like a car mechanic or construction worker, there are many tools in the toolbox, and selecting the wrong tool can impact the time and quality to complete a task. Lean tools are the same. They have to be selected based on what a Lean improvement project is trying to achieve.
For example, to find and measure the impact of waste across a process from enquiry to service delivery, Process and Value Stream Mapping are invaluable. Process maps illustrate how processes work, how long tasks take, the upstream and downstream activities, decision points, failure points and resource needs. Once a process map is established, it is easy to spot opportunities to improve quality, productivity and customer service.
The biggest challenge is probably getting buy-in from the organisation. Getting people to change isn’t easy. But, it can be achieved with Lean training, clear communication and project goals, involving people from different functions to be part of Lean projects, and empowering employees to make changes under their control.
Then, there’s the obstacle of sustaining changes. Just because a change to a process has been implemented doesn’t mean workers won’t slip back into old ways of doing things. This is where regular monitoring, termed Process Confirmation Runs, along with employee coaching to maintain and improve new ways of working, are established.
How do you get started with Lean?
Clear objectives are the foundations of any change initiative. You need to start with a clear idea of what you’re trying to do and why.
Do you need to improve customer service, efficiency, compliance or employee morale? What is the business goal you are trying to achieve? Who needs to be trained to apply the Lean methodology correctly? Where should you start?
Piloting Lean projects can be invaluable here. Take a couple of small processes, train people in Lean and start using Lean tools and the methodology. This way, you will quickly uncover the benefits and obstacles related to Lean tool application. Once you’re confident you can affect change with Lean, design a clear roll-out programme for the wider organisation. Throughout all this, communication and the involvement of people is crucial to successful outcomes.
Lean is a powerful process improvement tool that is being successfully used by organisations in a diverse range of service sectors. If you want to learn more about how Lean can help your company achieve lower costs and happier customers, as well as more revenue and profit, get in touch here.