LEAN ACCOUNTING BEST PRACTICES FOR SUSTAINABLE INTEGRATIONE phần 6 pps

2006 projected expenditures, and 2007 requests). As can be seen, SAR re￾ceives a significant amount of the overall budget at 11.8 percent in 2005. This

is roughly 4 percent less than the respondents felt it should receive. Over the

course of the three years of data, though, the SAR percentage of the budget

actually drops to 10.4 percent, further increasing the gap between “stake￾holder” value preferences and actual spending.

On the other end of the spectrum, Marine Safety is allotted 7.9 percent of

the USCG budget in 2005, growing to 8.9 percent in 2006 and then back to 8

percent in 2007 (projected). In contrast, the respondents to the survey only

placed 0.7 percent of the total value-based budget against this mission. Once

again, a significant gap between stakeholder preferences and USCG spending

is identified, this time as a significant overspend on marine safety and an un￾derspend on SAR missions.

Clearly, the missions and structure of the USCG is not based solely on the

preferences of the public for its services—it supports a vital set of missions

that have both short- and long-term implications for maritime and port safety

and security. In addition, stakeholder preferences are swayed by more imme￾diate events. The responses received in the wake of Hurricane Katrina efforts

are clearly different than those that would have been given immediately after

9/11. That being said, there is still directional information in the stakeholder

preferences—Coast Guard missions that directly impact the public are seen as

more valuable than those serving a smaller, less public constituency.

6.5 USING CUSTOMER PREFERENCES IN SEGMENTATION

The USCG cannot segment its market providing mission support to one group

and not another. Its missions and efforts are driven by natural disasters, geo￾graphical and commercial characteristics, and national priorities. In sharp

contrast, for-profit organizations need to build the information about customer

preferences into their segmentation strategies to ensure that they provide the

right services with the right mix of features to the right customers. Product/

service attributes generate revenue only when a customer values them. If fea￾tures are added that are not valued by a customer segment, they become

waste—a waste that lean management should target for elimination. Using di￾verse customer preferences to guide the development of product/service variety

that increases value, not waste, is the challenge. A second example helps illus￾trate these points.

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General Telecom, Inc. (GTI)8 was a large telecommunications firm that en￾tered the late 1990s struggling to remain competitive. It provided traditional

voice communication services for residential and commercial customers in

both the local and long distance markets. It was also entering the digital market,

reflecting the growing competition from cable providers for their customers.

Faced with an unregulated digital market, a recently deregulated long distance

market, and the threat of deregulation of its local service markets, GTI was

facing significant competitive challenges that lay outside of its traditional busi￾ness models.

To get a better understanding of what its customers preferred, GTI embarked

on a study of customer value preferences. Starting from a recap of key customer

complaints over the last two years, GTI’s marketing group worked with a focus

group of customers across its three primary product lines (long distance ser￾vice, Internet service, and local service) to identify key product attributes for

its various customers. The results of the focus group were then used to gen￾erate a telemarketing survey study to understand differences in customer pref￾erences for these attributes.

To put this problem into lean terms, the extra services required to secure In￾ternet customers’ business was waste to local customers, while friendly op￾erators so essential to the satisfaction of local customers was a form of waste

for Internet customers. The definition of waste, which drives lean process im￾provements, shifts radically between these customer segments. If GTI tries to

serve everyone’s needs with one business model, one product/service bundle,

it builds waste into its processes. Each customer segment places value on

unique types and quantities of attributes, transforming the definition of waste

and by extension the focus of the lean management initiative. One size would

not fit all.

As Exhibit 6.11 summarizes, the customers evaluated the services pro￾vided by GTI on six primary attributes: price of service, speed/ease of access

to network, responsiveness/friendliness of operators, convenient bill paying

locations, easy to understand statements/billings, and variety of packages or

services available. As the exhibit also suggests, there were significant differ￾ences across the three primary customer-product segments in terms of the im￾portance of the attributes. Where long distance customers were price sensitive,

local customers wanted friendly operators. Internet customers placed most of

their value in the speed and ease of access to the network.

Having identified the different preferences for these three primary types of

services, GTI then compared its actual spending on attributes versus those de￾sired by customers in the different segments, as shown in Exhibit 6.12. Clearly,

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the firm was not aligning its spending with the desires of any part of its market.

It was approaching the market with a “vanilla” strategy that did not differen￾tiate service offerings or intensities by customer segment, but rather offered the

same range of options to the entire market. Costs were assigned to match the

vanilla strategy, with cost per account of $119.57 serving as the primary met￾ric for assessing profitability of segments.

At the time of the study, GTI was facing $10 million in cost with revenues

just over $8 million—it was losing $2 million per year. Its lack of alignment

with customer requirements, a slowly responding structure ill designed to deal

with a nonregulated business environment, as well as the increasingly compet￾itive marketplace was driving GTI into bankruptcy. The misalignment of spend￾ing and the actual revenues and costs per segment are noted in Exhibit 6.12.

Under the generic costing model, it appeared that the local customers were

the “dogs” of the business, with revenue of $94.42 on average costs of $119.57,

or a loss of $24.15 per year per customer. On the other hand, Internet customers

looked quite profitable, with revenues of $152 per year, suggesting a profit of

$32.43 per customer. When costs were traced more accurately to the segments,

it became clear that all customers were unprofitable, with Internet customers

causing $121.60 more in cost than they were generating in revenue, or an an￾nual loss rate of 80 percent.

Average cost estimates reduce the accuracy and reliability of activity-based

costing methodologies. What separates customer-driven lean cost management

is its ability to pinpoint the areas where overspending and underspending are

taking place, allowing management to focus its actions on areas that will yield

the greatest positive impact on customer value creation. For instance, GTI

needs to eliminate any spending on friendly operators, convenient bill paying,

and easy-to-understand statements for the Internet users. They place no value on

these attributes, so every dollar spent on these attributes is waste. On the other

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EXHIBIT 6.11 GTI Customer Segments

Long Distance Internet Local Service

Value Attribute Customers Customers Customers

Price of Service 40% 30% 10%

Speed/ease of access 0% 50% 0%

Responsiveness 20% 0% 40%

Convenient locations 10% 0% 20%

Easy to understand bills 15% 0% 10%

Variety of services available 15% 20% 20%

TOTAL 100% 100% 100%

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