Make Customers Happier with Operational Transparency

AI is transforming the world, and it starts with the right compute. ARM is the AI compute platform trusted by global leaders, proudly NASDAQ listed, Built for the future. Visit arm.com discover. Welcome to the hbr ideacast from harvard business review. I'm kurt nickisch. Imagine a restaurant where you sit down and order your meal, and eventually your platter of hot food comes to you through swinging doors from the kitchen. Now imagine you're at a different restaurant where you order the very same meal, except you can see into the kitchen. You can see the cooks preparing your meal, putting it into the oven. You see them plate the and add a last pinch of salt, and then you see the server carry it over to you. In the first restaurant, your meal appears almost magically. You never see the people who made it for you. In the second, your experience is different. You have more of a sense of the work that goes into your food. Our guest today argues that too much of business today is like the first restaurant. In the spirit of efficiency, much of the work we pay for is now hidden in back offices, far away in another country, or buried deep in an algorithm. There are many advantages to that, but Ryan Buell says it also creates a problem for companies. By losing any window into the work being done for them, customers have grown less satisfied with what they buy, and employees can feel underappreciated, too. Ryan Buell is an associate professor at Harvard Business School, and he's the author of the HBR article Operational Transparency. Ryan, thanks for coming on the show.

Thanks for having me, Kurt.

So does business need to be seen?

Not always. We're actually seeing a trend toward a lot of business not being seen. If you think about when we interact with Amazon.com, we interact with the website, and magically, a couple days later, a package appears miraculously on our porch. But we're separated away from the ballet of people and technology that actually do the fulfillment and get that item to our house like magic. On the one hand, you'd say, well, that's terrific. We're getting exactly what we want. The products we want as quickly as possible, as easily as possible. The whole thing feels and looks effortless. But the challenge is that if business becomes too invisible, then it looks like no one's actually doing any work. When customers are separated from the people and the processes that create value for them, they come away feeling like less effort went into the service. They appreciate the service less, and then they value the service. So there are opportunities, I think, for many businesses to think about how they can become more Operationally transparent, opening up their operations so that customers can better see and understand the value that they're creating in their lives.

Can you just spell that out a little bit more? Because a lot has happened in 20th century business that made things easier and cheaper for customers, whether it was through technology, through globalization. Now it's become a problem that businesses maybe have to back away from. Or what problem do you see with this?

So as business is evolving, customers are increasingly becoming cordoned off from the people and processes that create value in their lives. If you think about products that are made on the other side of the globe, as a customer, we'll never go into the factories where those products are made. Or if you think about interacting with an online e commerce platform, there are lots of people that are at that company, right? At Amazon, there are lots of people working in the fulfillment centers. We'll never actually see the work that they're doing. There are lots of good reasons why businesses create distance between their customers and their operations. One really good reason is that it can make the operation more efficient. Another reason is that they're just trying to make the service itself seem as simple and easy and uncomplicated as possible. But there's a problem with this, which is that when customers are separated from the work that's being done behind the scenes to serve them, they appreciate the service less and then they value the service less. And it turns out that there's a problem for employees as well. When employees are separated from the people that they're helping, they feel like their work is less meaningful and less appreciated. That makes them less satisfied with their job and less willing to exert effort.

I used to cover agriculture, and so I used to cover lots of farmers who wanted customers buying their beef or whatever it was that they were producing. There was just a lot of unease and just unhappiness with the fact that maybe customers didn't appreciate the work that went into growing a cow or the work that went into, like, running a family farm.

I grew up on a farm. You did?

Yeah. Where did you grow up?

In Michigan, Just outside of Flint, actually. Yeah?

Yeah. What kind of farm?

So it was primarily crops. So we grew corn, soybeans, and wheat. But then we had a hobby farm where we had chickens, ducks, geese, turkeys, angora, goats, and two horses. One named Kouroush and one named Cody.

Why? So this is transparency, Right. Into a farm. Right. So when people pick up their steak, they don't know the cow. They don't know what the cow's name was or Maybe even where it came from. And so now I work in Boston, and I know people who've taken a weekend vacation and paid a lot of money to go to a farm in Maine to see how, like, a lamb gets slaughtered, for instance. Right. So people have gotten so out of touch that all of a sudden, this appreciation for, yeah, where does meat come from? Where does my food come from? For a while, people liked not to have to do that work because they knew how that work was done. And now we've gotten far enough away that people want to appreciate the process that went into it.

Again, I think that's a really interesting point. I hadn't thought of it in the context of farming before, but if you think about what life is like on a farm, you get up early in the morning, sometimes before the sun comes up. If it's a farm where you have livestock, then you're out there feeding and watering the animals. If it's one where you're growing crops, you spend a lot of time in the fields. There's a ton of work that goes on in producing that harvest. And it's interesting to think about what customers lose out on, but to your point, also what the people who are doing that work lose out on, when there's a lack of transparency for the customers into that hidden work that's going on to feed them, to serve them, and for the farmers into the people whose lives they're actually sustaining through their efforts and work. It's really interesting to think about how if more people had more of a view into the value that they create into the lives of others, how it could make the work that they did more motivating.

No, it's true. I think a lot of what has driven modern business, right, which is producing more at lower costs, a lot of that has created, like, work streams and processes that people enjoy because it does produce a lot at good cost. But, you know, people don't always want to see what they're not paying for.

That's right. That's right. I also think. I think this point you're making about efficiency is a really important one. Right. There's a very good reason why most farms keep themselves cordoned off from the general public. Right. If you want to have a productive farm, having customers traipsing through your fields and climbing on your trees is probably not the very best way to be maximally efficient. Researchers in the 1960s that were studying this question of how much customer contact do we want with operations used to call customers environmental disturbances. The idea, this is quoting Directly, we should isolate our core technologies and processes from customers, because basically, the underlying idea was the more contact they have, the less efficiently we can produce. But the real idea here, the real insight behind operational transparency, is that if we take that out to its logical extent, there are things we're losing as well. So there's a solution to this problem, which is to create operational transparency, or windows into and out of the process that allow customers to see and appreciate the hidden work that's going on behind the scenes to serve them, and that allows employees to see the people that their efforts are helping, which makes the work that they're doing feel more appreciated and meaningful.

How much do you think customers want to see?

I think that the answer to that question really varies from situation to situation. There are, I think, clear examples where operational transparency makes tons and tons of sense, where you have people that are experts at their craft who are working hard to create differentiated value for customers, and they're off on their own, and no one ever sees their work. They're toiling in obscurity. In situations like that, opening up a process and letting a customer see and appreciate what's being done makes tons and tons of sense. But at the same time, there are also examples where opening up a process could be the wrong thing to do, or at least in the short term, feel like the wrong thing to do.

You said a key word there, which was differentiation. And I feel like that is something that completely makes sense to me, because I can't tell you the number of stories I've heard about people who really like a new business. And then you ask them why, and then they explain it's because of some, like, window that they have into whatever. So they'll really like this restaurant because as they're, like, putting together their food for the day, they're, like, tweeting about it, and they follow that online, and they really get some insight into that. Right, that's an example. Or Etsy is. I think it's just a phenomenal example of, you know, people who are like, okay, I will pay a lot for this plate, because this woman in Vermont draws them herself. And you have that kind of insight into differentiated goods, and the transparency helps you see that.

Yeah. And I think the point you're making, I think, is a really important one, because so often we think of differentiation merely as a function of the outcome of the service or of the manufacturing process. And what I'm saying is that if more operations are operationally transparent, so customers can actually see the hidden work going on behind the scenes, the process itself can be differentiating as well. And that's a really powerful idea. Right. So often we try and separate customers from the operation for lots and lots of reasons. But in doing that, anything that we do that's unique or distinctive or impressive behind the scenes gets completely cordoned off, and no one gets to see and appreciate it. And what's more, the people, the very skilled artisans that are actually doing that work don't get to see that effort having impact in the world. And if we keep these two things separated, it destroys all kinds of value on both sides.

Yeah. What are some of your favorite examples?

One of my favorite examples is this company called Tesse in Japan. Tesse is the company that cleans the bullet trains in Japan. So Ethan Bernstein and I studied TESSE and a transition that they underwent back in 2005. This was work that was perceived to be almost shameful. People didn't respect Tesse crews work because it was perceived to be dirty, it was perceived to be difficult, it was perceived to be dangerous. And a new leader, Taro Yabe, came in and had this insight that if we actually just made the process a little bit more transparent, allowed customers to see the herculean efforts that went into cleaning these trains, then maybe we could actually change how customers thought about the work. And if we could do that, maybe we could change the way employees thought about the work as well. And one of the changes that he made that allowed this to happen was he changed the color of their uniforms just from a pale blue which blended into the body of the trains, really designed to be invisible, to a vibrant red that stood out. And all of a sudden, customers could see teams of 22 people cleaning a thousand seats in seven minutes. This dizzying array of activity that was going on inside the trains, the work that was being done to make these trains clean, and how impressive that work was. And it fundamentally shifted the dynamic between customers and employees. And this went from being a shameful job, a job of last resort, to. To one that people actually aspired to do.

Technology is certainly one thing that's made it possible for businesses to get their work done without having to trouble you so much. Right. But to what extent does technology give you touch points to interact or actually give the customer transparency?

I think technology can make a massive difference and make transparency much simpler for organizations. Oftentimes there's information that's hidden away in companies information systems that companies use for their own internal purposes. It's a really nice place to start to think about which pieces of information that we're keeping on hand for our own internal purposes might create value for customers. One of my favorite examples is Domino's Pizza. About nine years ago now, Domino's was facing a problem, which was that the operations of pizza are such that if a customer calls you just once to ask, where's my pizza? After they've ordered it, it pulls someone out of the kitchen, it ties up a line, it creates all kinds of operational havoc. And so Domino's thought about, how can we solve this problem? And it turned out that they had an information system. They were managing orders, they were timing how long it took to make pizzas. They had a well codified process. And the insight was, what if we create something called Domino's Pizza Tracker? What if we create on our website an opportunity for people to have a tie in to our information systems and actually see where their pizza is in the process? And then they got their marketing team involved, and it became kind of fun. If you've ever ordered a pizza through Domino's, then chances are you've used Pizza Tracker. Now, more than half of their orders are placed online. 75% of their online customers use Pizza Tracker. But what's really special about that example is that was information Domino's had already. And now customers using Domino's app or using Domino's website can actually follow through and see, okay, my order's being prepped. My order's just been put in the oven. Kurt just put my order in the oven, Right? And even if I'm not at the store, I can actually start to think about all the work that's being done. Right. Intellectually, we know that there's a box and dough and sauce and cheese and toppings that goes into pizza. And then once it's out of the oven, someone puts it in their car and drives it to our house. House. But when you start to actually break down all of those pieces, it makes you think more holistically about the value that a company like Domino's is creating. Right? At the end of the day, it's just pizza, and it's no different from pizza that's being produced anywhere else. But the insight here, what's so interesting, is that by providing transparency into their process, it fundamentally shifted the way that people think about that business, and it's fundamentally shifted the way that people interact with that business.

You better have a good process, right? It seems like if you let people track their pizzas and then even your app doesn't show where it is, or it just shows long gaps between getting picked up by a driver and when it was ready at the store, you're in trouble.

Yeah, this is absolutely right. I mean, I think if you have a terrible process, being operationally transparent is not going to work out. Right. If operational transparency means that you're revealing employ that are incapable of doing the work, that are indifferent about doing the work, that are powerless to get the work done, then it's going to lead to customer mistrust and frustration. But what's really interesting is that many organizations get nervous because they think that transparency means we have to be perfect 100% of the time. It turns out, and we studied this, that it's actually the organizations that are pretty good but not perfect that tend to benefit the most from operational transparency. Now, that may seem a little bit curious and a little bit odd. Why is it that if you're not perfect, that that's when customers are going to value it the most? When you open up your process. And it's because if you're not perfect, then it creates uncertainty for customers. And by giving them a window into the process, you can alleviate that uncertainty, but also help them understand what the challenges are that you face in creating value for them.

I feel like that completely makes sense to me too, because I see this with airlines and bag trackers. Delta used to give you so many thousand miles if your bag was more than 20 minutes late. And it seems like at first you used to get that a lot, and then with time, that went away. So it was very smart marketing, operational transparency, strategic process, all in one.

Absolutely. And what else goes into this is it becomes a very positive feedback loop. Right. Because when customers can see into the process and employees can see out of the process, it allows the customers and the employees to learn from each other and it accelerates improvement. It gives opportunities to celebrate improvements in performance, which can lead to better experiences for customers down the line.

Have you seen companies make the mistake of providing too much transparency or going too far, or is that a common thing? You hear from people that they're like, oh, we don't want to. Do people really want to know this?

Often a reaction that I'll get from managers is I'm not sure that people want to see what's going on behind the scenes in my operation, I'm not sure that if we provided operational transparency that anyone would really respect or appreciate that. Also, there's often misgivings about the employees. Right. Who then would be opened up to the scrutiny of customers. It's really interesting because typically the provision of operational transparency when customers can see employees and employees can see customers, leads to deeper engagement on both sides. But I think it's really important to be thoughtful about the dynamics that you're creating, because transparency that creates the feeling I'm being watched, rather than transparency that creates the feeling of I'm being engaged and I'm being appreciated can backfire. A nice example of this, Michelle Schell, who's a doctoral student here at hbs, and I recently did a project with a credit union that was providing transparency into its loan decisioning process. What was really interesting was that providing transparency, saying we're now pulling your credit report, for example, made customers just feel anxious. But when they took it one extra step further and they said, here's what we're doing during the loan decisioning process, and if you have any questions, my name is Ryan, and you can call me at this phone number, it actually made customers feel a lot better. We found, for example, that the probability that they'd go forward with a loan if it was extended to them went up by 16%. So it's not that I would say that transparency on its own is bad, but that we have to think very carefully about the dynamics that we're creating for everyone involved.

So let's talk for a bit about how this helps employees. How does this make a difference for people who work at a company and feel like their work matters more?

Yeah. So one of the things that I was staggered to learn was that in many hospitals, as much as 70% of the diagnoses and care plans come from the pathology lab. And that's interesting because I had never actually seen a pathology lab until I started doing this research. And there's a good reason for that. Pathology labs are cordoned off. Often they're in the basement or they're in a different facility. It's a lab. And at one of the local hospitals here, the pathology lab is separated from the rest of the hospital with a pneumatic tube system. Right. If a doctor wants to order a lab test, they'll put the specimen in a pneumatic tube that will get sucked down to the pathology lab. Now, think about the scene, right? So the patient is sitting there in their bed wondering what's going on. The doctors are completely separated from the people that are doing the work. And the people in pathology who are running these tests and who are generating insights that are genuinely life savings are cordoned away from the people whose lives they're saving. Right. And from the doctors who are on the front lines of this work. It turns out that this is a very demotivating job. If you go into the basement and you're doing this life saving work every day and you're never connected to the lives that you save, it's not very rewarding. A little bit of operational transparency there could make a massive difference.

How would you set that up?

How would you. So you could do it in a number of ways. One way would just be to allow some of the people that are doing these tests to meet some of the patients whose lives they save. Another way to do it would be to let some of the doctors who are ordering these tests take a tour in the lab and actually meet the people who are on the other end of that pneumatic tube system.

To a hospital administrator, they will think that sounds inefficient. How do I know when it's really worth taking the time for these two sides to have these little open house tours? Because that's on the clock and we're running a tight chip here. How do you know when that's worth.

Doesn't need to be the case that providing operational transparency makes operations less efficient or somehow more costly. And I think there's a huge role for experimentation in this, that there's no black or white rule saying that this is when transparency makes sense, this is when it doesn't make sense. This is the best way to do it, this is the worst way to do it. I think that it's the amalgamation of a lot of intuition from practitioners who have a depth of and knowledge in their work, having conversations with lots of people about how they're feeling in the environment and then trying things running tests. And although we've learned a lot over the last decade about operational transparency, we're still very, very early in learning about these relationships and learning about how to do it even better. But one thing that we absolutely know for sure is that complete opacity is almost never the right answer.

Ryan, thanks so much for coming in and talking about this.

Thanks, Kurt.

That's Ryan Buell. He's an associate professor at Harvard Business School and the author of the article Operational Transparency. It's in the March April 2019 issue of Harvard Business Review and at hbr.org. This episode was produced by Mary Dew. We get technical help from Rob Eckart. Adam Buchholz is our audio Product manager. Thanks for listening to the HBR Ideacast. I'm Kurt Nickish.