Monday, May 13, 2013

The Customer Does Know Best

I'm staying with the "Cake Boss" theme, as there is one more point I'd like to make with the help of the Carlo's Bakery team, before I move on. First, if you haven't read my other post about the bakery, please read in now, so you know what I'm referring to here.

Cakes Parade

During the show you can see Buddy and other members of his family and team refer to the "Carlo's Standard". I think you can get a glimpse of that in this picture of their cake display (which I wish I took). As you can see the cakes are extremely tidy and similar.

In his spin-off show "Next Great Baker", a reality competition to gain an internship at the Carlo's bakery, Buddy had the contestants make the purple cake with the flowers. He had any cake that was not up to "Carlo's Standard" trashed. He trashed cakes because 2 neighbor flowers were the exact same colors (instead of different colors in each tier) or because the dots were not contrasting to the nearest flower. So, I'd say we were talking military precision.

Standards are kept
Rehearsal for the Victory Day military parade in St. Petersburg 
In the military parade, by using uniforms and keeping all the details exactly the same, you make individuals look similar and create a single unit. There is, of course, nothing wrong with that. Well, at least if you are in the military and a parade is called for. I'm just not sure how useful a contribution this has for everyday life.

But, I promised we'll talk about customers, not about the merits of putting your cakes on military parade. So, let's get there.

Carlo's Bakery has set itself a standard. Standards are good, I'll be the first to admit that. But they are tools and just like any tool they are good if, and only if, they serve their purpose. If the standard becomes the goal in and of itself, it is no longer useful and it may even become a threat.

How do you decide where to set your standard so it is not so high that it's wasting your resources and not so low that quality becomes a problem? You turn to your customers. Now, in all honesty, customers do not always know best. Often the supplier is the authority on a subject matter, not the customer. But, and it is a great big But, there is just one part of life where the customer is always (and I do mean ALWAYS) right and does know best and no one but the customer is the authority on that subject. That is, of course, the customer itself. If a customer tells you there is no difference between product A and product B then, for all practical matters, A and B are the same. You, as an expert, may be sure these are different but they are not because, as far as the customer is concerned, they are equal in all important parameters. So you must only set your standards to appease your customers.

Consider the Carlo's Standard - would you notice if the color of the dot was similar to the color of the bottom layer of the nearest flower? and if you did notice, would you care? would that make the cake not as good as a cake with a good contrast, in your consumer eyes?

Many professionals start off by setting a high standard that is rewarded by the market. Then, to keep that lead, they keep pushing their standard up. This can work for a while but, eventually, the bar passes the indifference point, the point of satisfacficing and so additional improvement is not valued, or at least not values as much. This improvement still requires investment and so the market turns a cold shoulder to the offer, no longer willing to pay the ever increasing premiums as they no longer see additional value for themselves.

How does this all tie in with Theory of Constraints? easily, just 2 words - local optima. Optimizing, setting standards too high are just examples of local optima. Theory of Constraints holds local optima to be the original sin that leads to reduced performance in goal units.

How would you set your standards to avoid local optima?
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