Newsletter June 2002A
Adobe Acrobat PDF
Version in Newsletter Format June2002A

COMING AROUND TO SERVICE:
Banking and Finance

If you've not heard the slogan, "What's in your wallet?" from CapitalOne over the past year, you can quickly understand how powerful intelligent business decisions may be. CapitalOne has grown consistently 30% per year by doing things right. From television to acceptance letters sent to your mailbox on a frequent basis, the firm has quickly taken by storm the concept of complete customer purchasing, including alliances with auto lenders.

The truth is that the financial services industry has finally "gotten it," and more quickly than many other firms that are just slowly catching up.

They are using technology to reach their customers. For example, through Data Mining (sourcing through data to find clients and information), financial institutions are using the value of information to make targeted decisions. Poor credit customers are targeted with the same appeal as good credit customers with the exceptions of a higher interest rate and balance restrictions. Banks use ATMs, to service customers given us access to our money all over the world. We even do our own online applications and payments reducing in-house work from over $1.50 a transaction at the teller to pennies online.

Marketing- Not as if CapitalOne is alone in this market, but institutions like these have literally taken the punch out of American Express. The once prestigious AMEX card or even Platinum designation has been thrown to the wind as ego appeared to be a driving force for the card. Now financial firms offer the same "faced card" with credit limits as low as $500.00.

They are also reacting quickly to consumer needs. Americredit, out of Phoenix, Arizona, with over 80,000 customers, reacted to the 9-11 tragedies by converting a liability to an asset. Checks were taking nearly 10 days to reach their main processing center, so they expanded a $2.00 check by phone system while simultaneously developing their online services. The program is now so attractive that a large portion of their customers switched from mail to phone. Additionally, this fast growth company has implemented an online bill paying service while at the same time understanding that their high risk clients may not own computers.

Even the dot.coms have tried to give ease back to the consumer with services such as financial calculators or web addresses like lendingtree.com. The idea is to get the consumer to believe they are in control of their own money vs. the old days of closed at 3:00 PM. I can vividly recall the kind workers at our banks sitting behind their desks at 3:03 telling us they were closed.

You-play-or-you're-out is the game, and if you don't do what it takes to fulfill all the basic needs of your customers, you're out. Don't be surprised, if the banking industry will not be a lesson for all of us. Can someone check balances online for your firm? Can they view statements, change orders or even eliminate the salesperson for generic ordering? This is not just EDI used by retailers to check stock or to place orders, but to make consumers feel that they are running the show. Anything less will keep your competitive edge.

Yes we are a service country....and it does not matter if you're in banking or trucking or anything else. We all must be looking at more efficient, service-oriented ways of taking care of our customers.

              _________________________________

MASS CUSTOMIZATION:
Meeting Every Customers Individual Needs

Do you know the difference between a job shop, batch processing, or continuous flow? Over the past few decades the term mass customization entered the vocabulary as a methodology for producing high volume of a product with some customization. Levis Strauss the maker of the 501 Jeans and Dockers, during the 1980's became the first mass retailer to test this process by offering a pair of jeans that could be customized to your size after a fitting at your local store.

To the best of our knowledge, the product had not taken off in its original inception, as jeans arrived needing some alterations. Much has changed since then and Levis still offers the jeans under their Original Spin Jeans label. For $70 plus tax and shipping, the firm will build a pair of jeans just for you. To standardize the process, you get measured at one of the company-owned stores (the first opened in 1991). You are then given the options of styles and fabrics (including khakis) and within three weeks you will have your jeans.

The concept is that most of the process used to create the jeans is mass producible from creating the fabric to cutting the materials. Rolls Royce producing 1500 automobiles a year as a division of Volkswagen charges $250,000 a year using a similar process. There are the products that go straight off the assembly line and a segment that is customized to meet individual needs. The cost is more and the waiting is longer.

It has long been believed that we are moving more and more towards the ability to customize what we desire. Burger King created an assembly line that lived by the slogan, "Have it your way." Today when you stop in at a Taco Bell or a Wendy's, you can easily get the same type of service. When you start building a computer network, you may get open architecture where someone can alter the code or closed architecture where you get what you purchase with options built in. But does that mean we will be moving towards a society of mass customization? No not really.

Surprisingly, Oracle 9I's software released in the past few years eliminated all the options available, because as each firm altered their older software, they could no longer give it the proper technical support. Larry Elison's crew decided to figure out the major formats and give a limited number of options that they would support. Here they would continue to meet the majority of users' needs and also allow for solid customer service. Mass auto producers roll some cars off the line with sunroofs and some without, which provides options. But they don't force the plant to meet every individuals needs.

When looking at your firm in the scope of meeting everyone's needs, realize there are options that can be drawn from different manufacturing strategies.

Job Shops produce single items such as specialty furniture or a locally sewn, tailor-made suit. There is no difference between a plant that produces a small item versus one that manufactures a large item. Even a firm that builds yachts, such as Benetti Motor Yachts of Italy, is a job shop. Although its product sells for millions, the company is producing a product to meet one client's specific needs. The company utilizes tools and structure similar to a company that produces small jobs.

Batch Processors are firms that produces several items at a time to get quantities of scale. A local t-shirt silk screener might print 30 shirts for a school team or 5000 for a road race. When you ask them if they can produce one shirt they might be able to do the job, but if you watch the process, it will circumvent the traditional silkscreen process. The differences between batch and job shops are often confused since many firms occupy both categories. For example, a homebuilder might build one home on one location but at the same time might build 30-60 of the same version, thereby streamlining purchasing and production. This is the category with the most amount of range of capacities. A book manufacturer that prints a title for 20 weeks is just another form of batch house.

Continuous Flow is at the other end of the spectrum with limited, if any, flexibility in product production. Tide Laundry Detergent or Pepsi start their machines and keep pounding out product. Oil refineries and pharmaceuticals facilities are set up just the same with one product.

The mass manufacturer is trying to fit a newer need: the need to be the same, yet different. In deciding what you offer, remember that each process requires a different set of tools, including order takers, sales people, equipment and systems. When working to fill your customers' needs, try not to be too many things to too many people unless you understand the consequences of the range.

              _________________________________
David & Lorrie Goldsmith are founders of the Syracuse based MetaMatrix Consulting Group Inc. Their firm specializes in consulting, executive management education and speaking services. They can be reached at 315-476-0510  888-777-8857 or emailed at dgoldsmith@davidgoldsmith.com

Back to Newsletter Selection