What is your strategy for Useful Variation?
On the face of it, Useful Variation seems to be an oxymoron. In manufacturing processes, special cause or common cause variation is considered undesirable. Variation reduction is one of the major goals of processes and there is a good reason for it. When process variation is reduced, the consistency/repeatability improves – this in turn improves product quality (since the product can now be produced within certain specifications). The sources of variation in manufacturing are raw material, equipment used in processes, climatic conditions, and other unknown sources. Several tools and techniques of process control have been developed over the years to minimize the process variation. However, when it comes to services, not all variation is undesirable. We believe services have both – Useful or Desirable Variation and Undesirable Variation.

The question is, what is Useful Variation?
Let’s consider an example of a hotel. A guest comes in and is served by the hotel. The hotel has various processes to make the guest stay comfortable and enjoyable. All these processes have variation. In processes like laundry service or room service, the variation needs to be minimum. If the hotel promises a delivery of room service in 20 minutes, the service needs to be completed in 20 minutes – without much variation. However, when guest orders a food item that is not part of the menu, variation goes up. The question for the hotel leadership is, should the request be accommodated. If they do, the cost could be higher, if they do not, then the guest could be unhappy. Therefore, this request must be handled carefully. This variation is created by the guest or the customer itself and it provides an opportunity to the hotel to show the distinctiveness of their service. This is Useful Variation. Any variation caused by the customer itself which provides an opportunity to the company to delight the customer and build an enhanced loyalty (and therefore possibility of additional future revenues) can be considered as a Useful Variation.

However, this creates a dilemma for the service provider. Should they or should they not accommodate this variation? How far should they go to accommodate this variation? Under what circumstances should do they allow this variation? These questions really go to the heart of efficiency and effectiveness trade-offs debate. By accommodating the change request, organization incurs an additional cost and if it accommodates every variation, the cost of providing the service could be very high. Therefore, processes need to be designed to deal with both – Useful Variation and desirable Variation.

At Koinvent, we believe that organizations can handle this trade-off better by focusing on following factors. Let’s continue with the hotel example, however, this is applicable in most service organizations.

1. Understanding the type of variation
   Organizations have been able to control undesirable variation through various methods and tools, however, since the useful variation is caused by the customer itself, it is not be possible for the organization to eliminate it. What it can do is, to understand the implications of it and try to build processes to take advantage of it.
2. Building approaches to various categories of useful variation
   In the context of a hotel, for example, late or early check-in, as well as, late or early check-out can be considered as one category (there could be five more categories) of variation, since most hotels have fixed check-in and check-out time. Hotel can make use of this variation to their benefit. However, what they need is timely and precise information about customer’s schedule. This would require an intelligent system and a process, which makes the next point very critical.
3. Focusing on highly granular customer data and analysis
   All of us know that, the more we know about our customers, the better we can serve them. Today, it is possible to get plenty of information about the customers through various social media tools and applications, AI and other technologies. This data could be analyzed to extract useful information on a real-time basis. This could help the hotel to delight the customer when he/she walks in. In addition, a simple phone call to the customer to find out the exact check-in or check-out times could work as well. The precise timing of guest’s check-in and check-out times can open many opportunities for the hotel.
4. Building simple, flexible yet effective processes that allow empowerment
   In many situations, people directly serving the customer are not empowered to make any decisions. The processes are designed in such a way that even a small decision requires a permission from the supervisor. This step delays response time and increases customer irritation. In some well-known hotel chains, people are empowered to make quick decisions to keep their customers satisfied. In the Telecom industry, leading companies allow front-line customer service representatives to make decisions about disputed bill up to a certain amount. This improves customer satisfaction and eliminates several internal process issues. With Useful Variation, organizations need to build systems that are flexible, customer conscious and cost-optimized with a long-term view. It also means organizations need people that are highly empathetic, observant and understand flexibility within boundaries.

In summary, service organizations need to distinguish between useful variation and undesirable variation. There are many examples where companies have lost their customers because their processes clashed with Useful Variation – resulting into a loss of repeat business and customer loyalty. Useful Variation provides a tremendous opportunity to the organizations to build a customer relationship that is long-lasting and rewarding to both sides.

-Milind Pandit

At Koinvent, we help leaders think deeper, work smarter and manage better. If you would like to learn more about Koinvent, please visit our website at www.koinvent.com or send us an e-mail at contact@koinvent.com.