A surprising number of organizations
have no business model at all.
For the past few years, companies have been struggling to integrate total quality management into their annual business plans and strategic plans. For many companies, this struggle has been quite difficult. Quality still appears as an add-on, a "program" and, far too often, just another "flavor of the month."
Why is this so difficult? In reviewing the efforts of a number of companies over the past few years, I have concluded that there are three primary reasons companies are having so much trouble integrating quality into their business plans. Many companies have no business model, others have a seriously flawed business model, and others have business models that lack not only quality but other important characteristics.
A surprising number of organizations have no business model at all. A few executives may possess some vague understanding of how the business actually works, but there is no written document or simple description of the key processes, the customers, the critical success factors or any of the other ingredients of a business model. Often the executives' understanding is quite flawed or biased based on their financial, operations, marketing or distribution points of view.
Many organizations at least have implicit business models. The strategic plans, annual business plans and budgets provide a picture of how the company is organized and funded, and what results are reported. Unfortunately, these implied models often are dangerously flawed and reinforce the independent "silos" of departments and functions with the resulting failures of numerous handoffs, inefficient and ineffective cross-departmental processes, and almost nonexistent customer focus. Without a strong process orientation and customer focus, these business models often cause more harm than good.
Other companies have good business models&emdash;at least as far as they go. These organizations have clearly identified their core processes, have a strong customer focus and have created organizational structures and measurement systems that support these processes and produce excellent results. But often these models remain incomplete, and the missing pieces may create critical problems.
Some companies create task forces or special projects to deal with these omissions. Sometimes the number of special projects becomes overwhelming, and no one knows what is really important. Not long ago I reviewed a company that had 31 "critical task forces" in operation.
Recently, a number of leading companies have decided to develop new, comprehensive models for business excellence and use these models to review current performance. Not surprisingly, many organizations have found the Malcolm Baldrige National Quality Award criteria or the European Quality Award criteria good places to start. These quality awards have been evolving toward models of business excellence with each revision. Because the Baldrige Award's primary stated objective is to improve national competitiveness, this evolution is natural and to be applauded.
While using these quality award criteria for self-assessments, many companies have added what they felt were missing pieces, such as departmental, functional and divisional financial results. Some U.S. companies have picked up pieces from the European Quality Award on environmental quality and safety to include in their assessments. Still others have added pieces from ISO 9000 or QS-9000 to create their own assessment tools. These self-assessments have created de facto business models.
Some leading companies have taken the next step to create explicit models of business excellence. At the recent triannual International Quality Conference in Yokohama, a number of newspapers reported on these efforts. One of the best stories was by Dietmar Mangelsdorf, senior director of Siemens AG in Germany, who showed how they were using the European Quality Award model as a basis and incorporating the new ISO 14000 environmental management standard and occupational safety and health standards. By incorporating their long-established measures of financial results and other business measures, Siemens is creating an excellent model of excellence for their use.
Many companies are beginning to use these ideas to create models of business excellence that cover the core processes, the critical success factors and the key results areas essential for their future. By developing a working model for our own organizations, it becomes clear how quality must be integrated, what other areas must be emphasized and where we have current strengths. It becomes easy for senior executives to see where to put major efforts in the next few years and how to explain the reasons and actions needed to the entire company.
About the author
A. Blanton Godfrey is chairman and CEO of Juran Institute Inc., 11 River Road, Wilton, CT 06897. The Juran Institute is continually expanding its professional services to assist leading companies in developing comprehensive models of business excellence and assessing their current performance. Blan welcomes comments either by fax at (203) 834-9891 or e-mail at godfrey@netaxis.com.