Fitness for purpose

The London black taxi cab service, consisting of the product component (the cab) and the service delivery component (the driver), is extremely fit-for-purpose.

The cab’s design has evolved to be uniquely fit to operate on London’s streets: quick to get in and out of, tight turning radius, and so on.

The cab driver has evolved, too: it takes at least two years of learning — memorising all city streets and alleys — and an exam to become a cabbie. Part of the cabbie’s brain even enlarges in the process!

London’s black cabs being fit-for-purpose makes the service robust to new, disruptive technologies. Meanwhile, not so fit-for-purpose transportation services are under attack by disruptive mobile apps.

Products and services include three components: design, implementation, and service delivery.

To be fit-for-purpose for different customers, all three components must be sufficiently good. All three require business owners’ attention.

Customers understand their “why” and their selection criteria intuitively when they choose among the available offerings.

The same person can have different “whys” in different situations — and different criteria will drive them to different purchasing decisions.

When running a business, it would be helpful to have a system for understanding your customers’ “why,” their selection criteria, and how those affect your design, implementation, and service delivery. We will present such a system — our Fit-for-Purpose Framework — throughout the rest of the book.

For each fitness criterion, customers have some level of expectation that is acceptable to them.

You should segment your market based on your customer’s purpose. Each market segment will have not only a different purpose, but a different set of fitness criteria and thresholds.

The people who know your customer’s “why” and understand their criteria are your frontline staff. These are often the lowest-paid employees with the highest turnover rate.

Emotional motivation and brand loyalty can sometimes compensate for a lack of fit-for-purpose.

Fitness Box Score and F4P Cards are new tools to understand your customer’s “why.” They have evolved to give you actionable information. These techniques also offer substantial improvements over the popular Net Promoter Score (NPS). We present them in detail in Chapter 9.

Without understanding its customers’ various purposes and fitness criteria,your business may be challenged to satisfy or retain its existing customers or to find new ones. Therefore, understanding your customer’s “why” and their fitness criteria should be your business’s core strategic capability.

Fitness criteria indicate selection.

Key Performance Indicators (KPIs) should be fitness criteria.

The 2002 Oakland Athletics used the on-base percentage (OBP) as a KPI to select their offensive players.

The A’s won twenty games in a row. While the fans were impressed, the general manager Billy Beane (as portrayed in the movie Moneyball) saw the winning streak length as a vanity metric.

The Boston Marathon uses the finish time of another certified and qualifying marathon as a KPI for selecting the entrants.

Runners trying to qualify for the Boston Marathon and other competitive athletes know the finish time is their KPI. They track many other indicators, but they make no mistake about which of them is “key.”

Ferrari discovered at some point that their lead time of twenty-seven months was unsatisfactory to their customers and increased the production rate to shorten it to twenty-one months. Lead time is the KPI, the production rate (cars per shift) is a health indicator, and the order cancellation rate was the improvement driver.

At the time of writing, Tesla finds itself with a similar lead time as Ferrari for their Model 3, which is aimed at a much broader consumer market. Already having a winning design, the company will try to improve its implementation and service delivery to be fit-for-purpose on the broader market.

We’ve identified four types of metrics: Fitness criteria (KPI) with thresholds Health indicators Improvement drivers Vanity metrics

Companies already collect many metrics and the amount of metrics and data is projected to grow. “The metrics universe is vast already and continues to expand!”

Call for action: question why you collect metrics, their purpose, and whether they’re fit-for-[ that]-purpose.

Vanity metrics: Often are mistaken for one of the three useful types. Have no meaningful impact on decision making but serve a “feel good” purpose. Generally reflect some cultural issue that should be addressed first in order to remove the pressure to track the metric.

Fitness criteria: Should be your KPIs. There are good examples of how companies in various industries apply them.

Fitness criteria have thresholds: Minimum thresholds below which the product or service is unfit-for-purpose. Exceptional performance threshold that would be differentiating and perhaps an enabler of market disruption.

General health indicators: Have a guide range but no ideal value, threshold, or target. Can be allowed to vary within a defined healthy range without intervention. Many of the metrics you’re already tracking are more likely to be general health indicators than KPIs.

Improvement drivers: Have a target value to be achieved over time. When the target is reached, consider deprecating the metric or changing it to a health indicator and establishing the healthy range.

Industry examples: Airlines’ on-time departure percentage is a particularly insidious example of a vanity metric mistakenly used as a KPI.

Some software companies have misused test coverage as a KPI. Treating it as a health indicator and the count of test cases as an improvement driver is a better solution, avoiding dysfunction.

The Oakland Athletics baseball team continued to innovate even as the rest of baseball caught up to their Moneyball ideas. Cost-to-win ratio is an improvement driver showing they continue to innovate.

Walgreens pharmacy chain used profit per customer visit as an improvement driver.

Sungard realised how they were using a general health indicator as a KPI and how that resulted in poor customer satisfaction. They turned their service around by getting rid of the false KPI, finding their customers’ fitness criteria, and using those as KPIs.

There are four types of commonly recurring fitness criteria: Lead time and its predictability Quality and its predictability Safety and conformance with regulatory requirements Price and affordability

If you’re unsure what is driving customer selection in your business, these common fitness criteria can give you a good start.

Lead time is not a single number. It is important to consider not only the typical and average cases, but also the best and the worst. Ask both how fast and how predictable it is and needs to be.

Customers’ purpose is often linked to their timeline, therefore lead time is a ubiquitous fitness criterion. Every business should be measuring it.

Quality can be of functional (“ what”) and non-functional (“ how well”) variety. “How well” is often more difficult to achieve than “what.”

Price is not an independent variable. At each price point, customers have different combinations of other, non-financial, fitness criteria and thresholds.

Use customer narratives to identify your customer segments by purpose.

Position your business with respect to different customer segments: Some segments are central to your business. Encourage and grow them. Some are important but you may not be able to acknowledge their existence or advertise or sell directly to them. Apply indirect tactics. Some are worth a neutral stance. Some are not your target segments. Consider switching them off when they become problematic.

Bring your frontline staff into strategy discussions.

Identify fitness criteria and thresholds separately for each segment.

Reducing service levels and hoping customers won’t notice is dangerous unless you’ve got a very strong brand.

If you’re over-serving your market, validate this first and then reduce the service levels.

If you’re underserving your market, increasing the service level is a more difficult problem. It will take: A combination of KPI, health, and improvement indicators An iterative and incremental approach Determining the right threshold Deciding where to focus: design, implementation, or service delivery Considering the costs and the ease of rollback

F4P Cards are a simple tool to capture customer purposes, level of fitness of the given product or service for each of those purposes, and customer narratives explaining the reported fitness levels.

The F4P Card design shows some attention to implementation. The parts of the F4P Card layout have been thought out and tested to make the card fit-for-[ its own]-purpose.

Fitness Box Score (or F4P Box Score) is a compact summary of a representative sample of F4P Cards, showing details such as the percentage of purposes that were served in satisfactory, mediocre, and unsatisfactory fashion, the total number of customers, and the purposes reported in the sample.

F4P assessments can be clustered by purpose to understand how fit-for-purpose the product or service was for any given customer segment.

Depending on whether the customer segment (1) is or (2) is not our target, and whether the service is (1) satisfactory, (2) mediocre, or (3) unsatisfactory, we can take at least six different actions in response to the F4P data.

F4P Box Score is not a single number. There is no single metric anymore, so you won’t be driven to maximizing at all costs, including chasing wrong customers and overserving happy customers beyond their real fitness thresholds.

For mature markets where common purposes are known, it makes sense to optimize the F4P Cards by including an enumerated set of options with check boxes while leaving the option for a narrative to capture “other” insufficiently common reasons for consumer selection.

We’ve considered stories of two similar businesses making expansion plans. One firm speculated that there was a market for a somewhat different variety of their product. They took the gamble.

Another firm identified a market opportunity as a segment based on purpose and designed a service to be more fit-for-purpose than the existing alternatives. It’s not luck.

Classes of service are a powerful tool. Class of service determines how a customer or their order will be treated based on their needs or the price they paid.

When designing a class of service, think about how you can make something faster, with more choices, or with higher quality. Align classes of service with fitness criteria and thresholds.

When designing a service, always consider economics and don’t overserve a segment or market at the expense of profitability.

Some markets are segmented naturally by usage. In such markets, the Fit-for-Purpose Framework adds less value. as the product and service design already map well to the purpose.

Bloatware is a term to describe a problem that has challenged the high-tech industry for decades. It refers to products containing too many features trying to satisfy too many customer purposes. Web and mobile platform technologies have created an opportunity to move away from bloatware toward a family of products or services tailored to individual market segments based on purpose.

Like many business books, this text describes many simple, one-dimensional metrics. Metrics are generally better understood as probability distributions and coupled in pairs of measures, so that one measure acts as a feedback mechanism and constraint upon the other. You should generally beware of experts touting pursuit of simple numbers as the magic solution to business success. Understanding customers intimately in large-scale markets is challenging. While technology exists to gather feedback, it is hard to properly understand customers’ true purposes without direct contact at relatively human scales of one vendor staff member to less than 150 customers. The Fit-for-Purpose Framework isn’t a replacement for existing market research, although we believe it may be more actionable and more valuable for the long-term success of your business than some approaches you may be currently using. Fit-for-Purpose won’t help you under the following circumstances: Markets in which all alternatives are good enough, and selection is emotional, e.g., Coke versus Pepsi Knowing where someone is from Understanding identity, gender, age, ethnicity, and so on Whether someone referred them Hidden purposes and misdirection in stated purpose Dysfunctional, corrupt, or poorly educated markets unable or unwilling to make rational decisions

This chapter considers comparisons of the Fit-for-Purpose Framework with the popular concept of Jobs-to-be-Done (JTBD) and the popular surveying tool Net Promoter Score (NPS).

We’ve found examples where many Jobs-to-be-Done exist, but none of them leads to the actual fitness criteria used for selection by customers, the fitness thresholds, or even what it takes to be in a particular line of business.

The “JTBD gap” is likely to be wider for complex intellectual products made by large professional service enterprises with a high degree of specialization, using not a single design-implementation-delivery process, but a network of interdependent enterprise services.

Using Net Promoter Score (NPS) as “the only metric you’ll ever need” can lead to pursuit of short-term gain, instant gratification, and complacency. NPS isn’t fit-for-purpose if the purpose is to know whether something is an improvement or to get actionable feedback. F4P Cards and Fitness Box Score are fitter for such purposes.

F4P Cards and Fitness Box Score evolved from NPS as the starting point via an iterative process of mutation and testing for fitness.

The story of the evolution of F4P Cards and Fitness Box Score is how we know they’re fit-for-purpose.

We presented the synergies and integrations of the Fit-for-Purpose Framework with four popular methods.

The Fit-for-Purpose Framework makes it easier to apply the military-inspired guidance on Mission Command (Auftragstaktik) and achieve unity of purpose (Einheit) in large civilian enterprises. F4P helps with Einheit!

If your enterprise uses Balanced Scorecard, the Fit-for-Purpose Framework will help you implement it with greater depth. F4P will also ensure a better selection and more effective use of metrics appearing on your Balanced Scorecard.

The Fit-for-Purpose framework is compatible with Goal-directed Design and Personas. The purpose and the goal are essentially the same thing. F4P will also help your organization avoid the common mistake of segmenting markets demographically when designing personas.

If you’re a Lean Startup entrepreneur, the Fit-for-Purpose Framework will help you do a better job managing the risk of your enterprise and the uncertainty of the environment in which your enterprise operates.