In retrospect it was easy to see that the strategic planning process for new products was flawed. What began as a simple customer-service escalation due to product quality issues for Strategic Network and Broadband Co. (SNB) exposed a major corporate process problem that affected revenue and customer loyalty.
The sales teams were promising product enhancements to customers for older products instead of selling the new offerings. Finding and fixing the root cause of the problem challenged the company in unexpected ways.
Doug, vice president of customer service, was having an ongoing problem with the install base. Customer complaints were trending up, and there was no clear reason or a clear solution.
Strategic Network and Broadband Co., producer of leading-edge technology solutions used in central telephone offices, field locations, and at customers’ homes, had seen year-over-year revenue growth to $200 million a year across a diverse customer base. The market for broadband communication to remote regions of the United States was booming, fueled by consumer demand and continued government funding to bring broadband communication to the home. The company had a good—but not great—product quality history. It always delivered cutting-edge solutions to the market first, and its fantastic customer service organization resolved customer issues quickly. This combination had created an extremely loyal customer base.
But the problem being identified now in Doug’s call center was something new. The center was getting more and more calls on older products. Doug called Tom, the vice president of engineering, into his office to discuss the new wave of calls.
Strategic Network and Broadband Co. had a robust quality system. Weekly meetings were held where more than 50 quality metrics were reviewed, including hardware performance, software performance, and overall testing and testing integration. Doug and Tom reviewed some of the previous quality problems that could be causing the increase in calls. A component issue not detected during product qualification or testing had reached the field, requiring a significant recall. And when the fix was supplied to the field, the solution failed in some conditions that required yet another field change order. But that problem was mostly resolved, and customers remained loyal. That was due to SNB’s relentless focus on the customer to always keep promises and to do “whatever it takes” to fix the problem.
Doug and Tom also talked about some recent software quality issues, getting products through the qualification process on time to meet customer delivery commitments, and some new and significant bugs in existing products that caused network downtime. But their review of the most recent quality meetings did not indicate anything that would warrant the increased call volume. So they decided to take a direct approach: Reach out to the sales teams and customers directly to ask them what they were seeing.
Doug decided to personally call each of the sales regions across the United States. He thought it was too risky to call the customer directly because he still didn’t have a good understanding of the problem. During the first sales call, he realized that something was terribly wrong.
“Look, loyalty is great,” exclaimed the first divisional sales manager. “In fact, my customers are willing to pay a premium for the features we provide. They don’t like some of our quality problems, but they know we have a great engineering team and that we solve problems quickly when we have them. And they are really hooked on our cutting-edge technology to differentiate themselves from their competitors.
“What’s really killing us is corporate commitment,” he continued. “We can sell our product, even with some of the past quality problems, because in the long run our customers know we keep our promises to fix any problem. But now you have put me in a situation that even I can’t recover from: You promised a new lineup of products with specific delivery dates that you have failed to meet. After multiple commits and misses, my customer doesn’t believe me anymore. Our core competitive advantage, our commitment to our customer, doesn’t mean anything anymore.”
Tom and Doug thanked the sales team for their open communication and promised something would be done. After a few additional calls to other sales teams, they had a good handle on why call volume was increasing: Delivering new products on time, and meeting commitments, was the systemic issue that was causing the customer pain.
Strategic Network and Broadband Co.’s quality dashboard was best in class, based on feedback from other companies. But despite the 50 quality metrics that focused on the various traditional performance measures, no one chart seemed to be good at describing the current problem in the field. Tom thought about asking the quality team to build another chart—but for what? He decided to get some additional information from his engineering teams.
“Sure, we constantly miss product commit dates since we are way over scheduled,” responded one of the most senior engineers. Head nods from the others indicated agreement. Tom had heard this problem before but decided to go deeper into it.
“New product delivery is a problem, but it’s not the real problem,” stated one of the engineers. “The schedules are solid when we create them. The problem is that the schedule keeps changing. Doug is on us all the time to address problems the field is seeing on older products—ones that we agreed to fix with our new products. Plus, sales keeps selling the older product even when they committed to sell the new line. And Fred is down here all the time changing priorities.”
When Tom approached Fred, head of SNB’s marketing, he was immediately defensive. “Wait a minute, Tom,” he said. “At the last executive staff meeting, you indicated that the engineers were way behind, and you would take care of it.”
“That’s true,” said Tom. “But I have a lot more information now. My engineers are indeed late in delivering some new products that customers want. But they tell me that your team is changing the priorities all the time. And now you are asking my engineers to add enhancements to older products that weren’t captured in the planning process. And why are you asking for enhancements to older products, anyway?”
Then Tom delivered the last piece of the puzzle: “Plus the sales teams are now bypassing marketing and calling directly into my engineers looking for specific features.”
Fred saw it first. “The management process for setting engineering priorities is broken,” he said. “I am always getting calls from sales about new product delivery delays. And since new products aren’t getting delivered on time, we asked the engineers to go back to the older products and add a few new features to keep the customer base happy.”
They all agreed that by asking the engineers to add new features to the older product in an effort to keep customers happy, they made the problem even worse. They failed to deliver new product, rushed out older product that didn’t meet SNB’s quality standards, and didn’t keep their promise to the customer.
Tom, Doug, and Fred concurred that the engineering priorities should be based on the company’s revenue requirements and customer requirements. But it wasn’t the engineers who kept changing the priorities—they were. They realized that sales changing the schedule was only a symptom of the problem and not the root cause. The root cause was twofold: No executive ownership of the cross-functional process existed, and the process did not have visible metrics. The only way they knew the process was out of control was because of customer complaints.
Tom and Doug facilitated a meeting with the CEO and all of her direct reports. The sales team presented the voice of the customer data. After some discussion it became clear that the executive stakeholders were in agreement with the problem definition but didn’t know what next steps were necessary to solve the problem.
A kaizen event was held to help answer that question, and it revealed that the process had no owner, no end-to-end process documentation, and only localized department metrics that in some cases were having a negative effect on the customer. A team was put in place to document the baseline process and metrics. That would establish a starting point for improvement. The team was also tasked with creating a new prioritization process to manage product reschedules. The ownership issue was settled as well, but only after a much longer debate at the executive level. A unique “federated” model of ownership was created that locked executive compensation together while at the same time retaining ownership of their respective organizations.
Creating an improved measurement system for the cross-functional process was next on the agenda. The customers had made it clear that schedule attainment and visibility to any changes were critical to the company’s success. The quality team, responsible for and overseeing metrics creation, started with these goals as the highest-level metrics and then slowly created a hierarchy of metrics that would be used to measure the process. Some of the new process metrics included a time-based delivery metric for a product against the original schedule, a way to capture rework caused by schedule changes, two quality-based product metrics (initial and field warranty costs), and a new metric to track engineering productivity. The quality dashboard was then redesigned to include these process metrics and integrated into the existing weekly business review process for sustainability.
Redesigning the process, adding an enhanced measurement system, and addressing ownership turned out to be the easy part of the fix. Sales validated the strategic planning fixes with the customer. The company started to meet its promises to the customer, and damaged loyalty was improving. With a new set of sustainability metrics in place to monitor the process performance, SNB is confident it can continue to grow sales and take market share.
However, the real work involved understanding the company’s culture and how to change the leadership decision-making process to meet the strategic product goals. In this case, once the voice of the customer was clearly heard, the executive team quickly rallied as a unified team with a common goal. Focusing on the customer turned out to be the critical action needed for success.