Why customer-driven innovation works

I have often emphasised that innovation can take place in product, process, business models, supply chain, vendor management, employee management and various other aspects of business.

Today, I will discuss another innovative business reorganisation model to serve the customer better -- implemented by Ucal Fuel Systems (Ucal). The Factory within Factory (FWF) concept that Ucal observed at FAVI, France, was remodeled by it to suit its needs.

Many might say that that there is nothing innovative about Ucal implementing the FWF concept since it was already being used by FAVI. However, I believe that imitation is the first step to training and innovation. 

Further, implementing a concept requires realigning it to meet the specific environment and needs of the organisation where it will be used. It cannot be simply lifted and placed in another organisation.

Ucal was amongst the members of the first CII Shiba Learning Community. After achieving product breakthroughs following management expert Shoji Shiba's methodology, Ucal was looking at an "organisation breakthrough".

The reason: Ucal is an organisation that prides itself on its manufacturing system but it was losing market share. Even though the company had manufacturing excellence, ultimately its customer were not happy for various reasons. The company was facing customer rejection of 5,000 ppm on a monthly production of 40,000, manpower of 71 for the line and an output of 563 units a month.

Ucal found its solution in the FWF concept that it had observed at FAVI in France, while on a mission organised by the CII. FAVI  has changed its product line a number of times to meet changing market needs, always keeping in mind its core competence.

In just seven months after implementation, its rejections were down from 5,000 ppm rejections to zero, the manpower requirement to produce 35,000 units reduced from 71 to 52 people, while the output per man month increased from 563 to 673.

Per employee turnover increased from Rs 2.3 lakh (Rs 230,000) to Rs 2.7 lakh (Rs 270,000), and four high investment machining lines were reduced to two for almost the same amount of output.

The employee ownership increased since the FWF team manages everything from the staff function till the product reaches the customer. The line stoppages reduced to zero, overall efficiency improved and delivery performance became 100 per cent. Importantly, the costs of improvement actually reduced after the FWF concept was implemented.

The FWF concept is based on the premise that to get money you have to be loved by the customer, which requires one-to-one contact and customer satisfaction. Thus, if a factory connects with various customers it must unite the manufacturing process with every customer. This means creating a customer-focused mini factory. 

For Ucal this was not difficult as it already had distinct teams focusing on different customers and assembly lines were in any case product specific. But its original lines were based on verticals -- purchase department, ppc, production engineering, quality control, sales and so on were all vertically aligned and none of them had direct interaction with the customer.

This is where Shiba helped the company through his methodology, synthesising, model building and so on. The company conducted interviews, asked leading and follow-up questions to customers to identify the hidden elements of the problems. 

Following this process, the organisation transformed from a vertical to a horizontal one. Essentially, the ownership of the line and the area of work were handed over to the people responsible, so the focus of effort was based on a set of people. Such an organisation becomes a factory by itself with a cross-functional team focused on one customer. This team handles everything with respect to a particular customer -- from sourcing to marketing to after-sales.

Ucal achieved this by taking many small steps, not one big step. It gave additional responsibility to people; small incremental steps such as introducing standardisation to eliminate the blame game were taken; people were made to feel empowered and a number of employee welfare programmes were introduced.

Ucal is the first company to introduce this innovative concept in its factory in India. The synergy obtained is reflected in the results.

The company is meeting 100 per cent delivery performance with less effort, less cost and less management. The feeling of ownership among employees is much higher, a result of a customer-centric process. Most important, the company has achieved a more satisfied customer.