Maximizing “efficiency” by maximizing resource utilization results in minimizing customer value

In my previous posting I described the developments within the public transportation system of Northern Stockholm, after Arriva taking over January 7, 2013. My hypothesis for the root causes for the chaos that  now reins after Arriva taking over, as described in the previous post, is that Arriva, who won the contract with a bid 30% lower than the competition, to make ends meet, has pushed the “utilization factor” of the two key resources, the buses and the drivers, way above the “system congestion treshold”, i.e. to a level where the overall system throughput is killed due to the exponentially growing level of  system fragility, in turn caused by the utilization factor exceeding a critical value, typically around 70%.

It is very interesting to compare the graph below (from svt.se/ABC) , depicting the trend in customer complaints, with the utilization factor graph:

Image

Image

Thus, my hypothesis is that the >700% increase in customer complaints which occurs simultaneously with Arriva taking over traffic in Northern Stockholm is fundamentally due to Arriva being forced by their 30% lower bid to maximize resource utilization, to such a degree that the overall system performance gets killed.

Lesson learned: relentless simpleminded pursuit of “efficiency”, without due consideration for customer value carries the risk of “system collapse”.

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About swdevperestroika

High tech industry veteran, avid hacker reluctantly transformed to mgmt consultant.
This entry was posted in Business, Leadership, Management, Organization and tagged , , , . Bookmark the permalink.

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