There is an almost invisible force that is hurting your business right now. It is slowing your growth, negatively impacting your quality, and ballooning your costs. It’s called VARIABILITY and it is deadly. But, before you throw in the towel, it is possible to turn what could be a deadly force into a friend, and in this article, I’m going to show you how.
Before we dive into the nuts and bolts of variability management we’ve got to define what variability is and why it matters.
Imagine for a moment that you’re trying to fight a war, but you have no clue when new recruits, ammunition, or supplies and equipment will come in. You don’t know whether the recruits will be Army Rangers or janitors. You don’t know what ammunition you’ll receive or if it will fit your weapons (if you get any). You don’t even know if you’ll be getting food, tents, and shoes, or can openers, shoe laces, and sunscreen.
It would be nearly impossible to fight and win a war if that’s what you were facing – in addition to the enemy.
That’s variability.
Simply put, variability is the lack of consistency in various aspects of your business that negatively impact your revenue, service/product quality, and your ability to grow. And, while it may seem tiny at first, the effect of small variability grows downstream.
That’s called the Bull-Whip Effect, or the tendency of the impact from small variability to grow as it moves away from where it started. Picture Indiana Jones with his whip.
With one tiny flick of his wrist, he can make a big crack, disarm Nazis, or stop a thug dead in his tracks. That’s kind of what the Bull-Whip effect is doing to your business – stopping it dead in its tracks.
There are 6 specific types of variability that can impact your business and you’re going to manage each one differently. I use an acronym to remember them: SCRAPE.
Subjective Preference – The differences in taste and preference that customers have. Changes in customer tastes can have a huge impact on your business. If you’re trying to serve a broad base of clients, you’re constantly scrambling to meet their preferences.
Customer Capability– The differences in the skills that customers possess to implement your solutions. In service environments, the likelihood is that the customer will have to do something so you can complete the job. Whatever it is, it may just be out of your customer’s skillset. This difference in ability adds a layer of variability that impacts your ability to service all your clients, not just that one.
Request– Unpredictability in customer the types of services customers will ask for. Different customers have different needs. If you try to solve problems you are neither equipped nor trained to handle, you risk failure, brand dilution, and potential legal action. Even if you are able to handle it, you waste precious time and expertise transitioning from one problem to the next to the next.
Arrival – Unpredictability in customer arrival times. Customers can arrive at different times. Unless you have a system to manage them, it can create peaks and troughs in demand that make forecasting and growth difficult and expensive.
Provider Capability– The differences in the skills your team possesses to service your customers. Your team isn’t made up of a bunch of clones or robots who can all do the same thing. But, that lack of uniformity can make your team less adaptable to changing situations, causing you to lose out on money and forego important opportunities.
Effort – The difference in the effort your customers will put into helping you solve their problems. Sometimes what you do requires customer input. This introduces variability based on how much effort and attention they’re willing to put into the interaction. The level of effort your customer puts into their interactions with you has a direct relationship to quality and cost. And, as you’ll see could impact your cash flows.
You’re likely experiencing all of the 6 types of variation in different degrees. But there is definitely one that stands out more than most. And, as you deal with it you open up a whole world of growth, quality, and revenue opportunities.
I was working with a business that had major cash flow problems. They had structured their deal flow so that they would collect 50% of their payment up front and then additional payments were made upon completion of certain milestones.
This introduced Effort Variability into the deal flow because clients had to approve work. If the clients didn’t approve, or just took a long time to do their part, then the project stalled, milestones weren’t reached, and payments were delayed.
After teaching them about effort variability we restructured the deal flow within 20 minutes and they resolved major issues that had been holding them back for years. They’ve subsequently grown by 30% this year alone.
Another business didn’t have enough employees to function, or so they thought. This made their service take longer than their competition, upset their customers, and increased employee turnover. After learning about Provider Capability variability, they realized that they needed to cross-train all their employees to give themselves a workforce that could adapt to changing demands.
Customers are happier, process times are now lower, and they’re now able to grow without hiring more employees.
Want to learn how your business can do the same? Schedule an appointment and we can assess which variability is impacting you the most. In 60-minutes we can get rid of the obstacles holding you back from reaching your full growth potential.
