International Process and Performance Institute

How many of you have experienced or heard of someone who paid for an airline ticket, and upon check-in discovered it was going to cost extra for any checked luggage?  It’s a common story these days. It is not uncommon for customers everywhere to experience nasty surprises or what I call “nasty’s,” which leave the customer feeling duped, cheated, or at a minimum, wanting.  These surprises happen when the customer realizes they didn’t transfer as much of the risk as they thought.  It’s the Grim Reaper of customer loyalty. 

It is a fundamental principle in business that every transaction is a transfer of risk.  A customer pays for goods or services with the expectation the risk of achieving the desired outcome of their own efforts, or from any other alternative, is lowered.  An example I like to use in my coaching is the choice of dining out. There are two very diverse desired outcomes in dining out I use to illustrate the point.  The first is fast food.  Sometimes we are short of time or the opportunity to prepare nourishment for ourselves or those we need to feed. We are willing to pay the cost of fast food when the risk of taking the time or making the effort to put together a meal in any other way is higher than the cost.  We are transferring the risk of time either in gathering and/or preparing a meal in exchange for the price of the fast food.  

Another example at the other end of the spectrum is when we choose to go to an upscale restaurant. Our motivation for this may be to entertain friends, celebrate a special event, or impress someone.  Our expectation is that a professional chef and wait staff will create a much better experience than we could do ourselves.  We are transferring the risk our homemade meal will be less gratifying than the upscale restaurant will provide.  I hope you can see even the simplest of business transactions are all about the transfer of risk.  Our customers are indeed paying us to take on their risk.

Yet in actuality, many companies push a lot of risk back on their customer in subtle and sometimes, as in the airline case above, not so subtle ways.  There is a way to analyze your customer facing processes to see where you are putting risk back on the customer.  There are two components of a process which carry varying levels of risk for the customer which we can identify and assess that risk.

The first component is any place in the process where the customer touches the process or the process touches the customer.  Richard Normann called these Moments of Truth and the name we have adopted for them as well.  The second component is what Dr. W. Edwards Deming called the “handoff-points,” or what we call Break Points. These are any place in the process where work is handed off or information is transferred.  It is at these places in the process where risk can be pushed back onto the customer. 

So how do we know how significant the risk transfer can be in a given process and then reduce it?  Well, we ask for each and every occurrence of a Moment of Truth or Break Point, “if that particular part of the process were to fail, how much risk does that represent to the customer?”  We simply rate each one high, medium or low.  How do we determine that?  A simple test of how likely the customer will leave us if:

·         it fails many times and the customer is only annoyed = Low

·         it fails once and the customer is annoyed, but after repeated failures the customer leaves = Medium

·         it fails even once = High 

The customer’s willingness to tolerate failure is directly related to how much risk they are willing to sustain in the relationship.  If one or more of these components of your processes are “High” risk, you are very likely putting too much risk back on your customers.  In some cases, an aggregate of “Medium” risk interactions can also be putting too much risk on the customer. 

So how do we reduce the risk in the process?  We simply find actions which will eliminate all the high and some of the medium risk interactions in the process.  Once we have the eyes to see what is really going on in the process, it actually becomes fairly easy to see solutions.  By the way, that is not a misprint.  I specifically meant to use the plural “solutions” because we often can find multiple ways to affect the desired changes once we see the process as it really is.  This is the magic the CEM Method brings to process analysis and improvement. 

In closing, your customers are engaging you because you are the supposed experts at mitigating the risk they seek to reduce.  The natural evolution of processes for all organizations is to push back certain amounts of risk.  We need to see it and reverse it.  It can be fixed and you can do something about it.  Your organization’s success depends on it.