The quality movement provided a solid foundation on which many U.S. companies managed their return to strong growth following the difficult 1980s and early 1990s. These quality systems and processes have subsequently become major influences in businesses throughout Asia, Europe, Latin America, the Middle East and Micronesia. At the same time, however, powerful new global economic forces were radically changing the concepts of quality and how it was managed. These forces now make it essential that quality managers face the future with quality-based management programs that fit the new business era, rather than continuing with systems that may have worked in the recent past. Several trends will impact quality management’s future. This article examines them and the strategies that organizations should implement as a result. Demanding customers By the end of this decade, well over 1 billion men and women, and the companies that provide products and services to them, will make up an increasingly demanding customer base in common markets or regional trade alliances throughout the Americas, Asia and Europe. Moreover, this figure probably will increase as we proceed into the 21st century, now within the practical time horizon for realistic corporate business planning. At the heart of accelerating sales and market shares that pacesetter international companies enjoy today is an unflagging responsiveness to the demanding global customer. Surveys conducted by General Systems Co. indicate that when a global market consumer is satisfied with quality, he or she tells six others about the product or service; if that person is dissatisfied, 22 others hear about it. When it comes to transactions within industries, data show that a satisfied industrial customer is seven to eight times more likely to buy again from the same supplier than from its competitors. That’s the power of complete quality satisfaction in today’s markets. As this global economy reaches out to world businesses, it becomes clear that quality is becoming not only the international business language for worldwide trade networks but also that worldwide economic and social forces are fundamentally changing quality concepts and management. Improved quality now means an increase in value as well as right performance, service, design and economy for global customers. This differs from quality control’s former focus on defect reduction alone. Understanding and speaking this new quality language -- and transforming quality processes accordingly -- is a principal goal of successful companies that are becoming sales growth and earnings profitability leaders in the new global economy. A closer look at the global economic, social and trade forces upon which these companies have been built can offer some insight into their success. Shifting customer value expectations Perhaps most important is the fundamental shift in customer value expectations in the global marketplace. Ongoing surveys of customer buying patterns throughout major international markets indicate that nine out of 10 buyers make quality their primary purchasing standard, as compared with three or four out of 10 a decade ago. As customers, they increasingly approach quality as a buying discipline, which they measure by their total-value perception of the product as well as the organization that produces it. This means that the quality of the steel or the merchandising service customers receive is an important part -- but just a part -- of the complete support, billing accuracy and delivery reliability package they expect to buy. For example, routinely and properly washing automobiles as part of a dealer service call is a simple but nonetheless expected service that many customers identify as a value differentiator. The service shows that the dealer cares, and customers appreciate saving the time and effort. They assume, correctly or incorrectly, that a responsible dealer can accomplish any technical action. Similarly, the voluntary elimination by a mobile communications company of a few dead spots on a main trucking route is one of the primary buyer-value reasons customers cite for their return sales with that company rather than with its competitors. For consumers, this attitude is driven by a need to improve their standard of living. For business buyers, it’s driven by economic pressures that demand reliable, predictable equipment and services without time-consuming failures or other hidden costs. These buyers expect a level of quality that is essentially perfect for their needs, affordable and user-determined. This demand for complete customer satisfaction indicates a profound social shift for both global consumers and business buyers. Organizations that continue to concentrate solely on defect reduction overlook their customers’ new buyer-value expectations. This is most evident in the disparity between many companies’ quality satisfaction measurements. Some companies point proudly to their quality improvement data -- i.e., defect reduction -- even as customer surveys indicate that buyers believe quality hasn’t improved -- i.e., increased in quality value -- and they are therefore curtailing their business with these companies. Economic pressures Another force is the overwhelming economic pressure on organizations. Like a giant pair of scissors, the pressure closes in on many of them from opposing directions. One is the strong upward pressure due to increasing costs despite concerted containment efforts; the other is a severe downward pressure on the price of goods due to market changes. To compound matters, even after years of cost accounting, many organizations still don’t know what things really cost as a foundation for true cost reduction. For example, some companies have adopted a slash-and-burn cost-reduction approach. However, unless it’s synchronized with specific improvements in process, cost reduction produces the same results as weight reduction without a change in lifestyle: It doesn’t stick. Instead, it leads to more cost reduction, more restructuring and corporate-navel contemplating. As a result, these companies become out of touch with rapid changes in new markets, new employee attitudes and new management approaches. The key is to directly link customer value enhancement with cost. Improving quality also improves an organization overall -- from marketing and design to operations and distribution. Therefore, cost must include not only operations and sales but also delivering customer satisfaction. General Systems survey data show that, at many companies, this accounts for as much as 25 percent of sales, much of it for quality failures. For companies in which total quality has been correctly managed, the figure is 10 percent or less. Total quality initiatives have established teamwork processes that, by improving quality for customers, have greatly reduced the costs accrued from failing to deliver customer satisfaction. These reductions help support quality value-enhancement programs as well as bottom-line net operating income. Shareholders and investors can understand such reductions. New management approaches These two forces -- the shift in customer value expectations and new economic pressures -- lead to a third force: innovative management approaches to human leadership. These approaches reject the notion that good management and successful improvement means getting the ideas out of the boss’s head and into the workers’ hands. Organizations that embrace this approach to business improvement become increasingly estranged from their customers, employees and suppliers. Top-down planning only serves to isolate organizations from their customers’ buying habits. It encourages an atmosphere of intimidation with suppliers rather than a partnership. Under the old-school management regime, human resource improvement programs hardly fare better. They are keyed to flashy motivational seminars, combined with regular doses of management speech making. But when employees return to their jobs to apply what they’ve heard, they face the same old ambiguous management practices and continue to thread their way through autonomous departmental islands without any bridges between them. A very different foundation for business success will characterize competitive organizations in the future. These quality leadership companies will:  Make quality the epicenter of increasing revenue growth and competitive leadership.
Achieve complete customer satisfaction by offering essentially perfect goods and services whose quality the customer determines. Accelerate sales and earnings growth through quality failure reduction. Innovate in product and service leadership and cycle-time management. Restore the “fizz” to jobs by using tools and resources to encourage employee participation in quality improvement. Develop effective supplier partnerships. Create a seamless quality value network among customer, producer and supplier relationships. Provide environmental and safety leadership. nEnsure that quality remains the company’s international business language. Companies that can implement these processes won’t travel under any single national passport, nor any particular cultural or social identity. But they will share certain quality management characteristics. In particular, they will: Consider their basic objective as continuously accelerating value for customers, investors and employees. Emphasize that “market-driven” means quality according to what their customers, not the company, say it is. Lead by a combination of passion, discipline and populism, with a bias for improvement and an emphasis on communication. Recognize that sustained growth demands increasing customer satisfaction, cost leadership, human resource effectiveness and integration with their supplier base -- all four, all the time. Foster a deep commitment to fundamental business improvement through knowledge, skills, democratic problem solving and teamwork. These characteristics will provide improved quality to customers and help organizations successfully face the social and economic changes that are ushering in a new global business climate. About the author Armand V. Feigenbaum is president and CEO of General Systems Co., an international leader in designing and implementing management operating systems for manufacturing and service companies. His book, Total Quality Control (McGraw-Hill, 1983), has been translated into six languages and is used throughout the world as a foundation for quality control practice. For more information, contact General Systems Co. at fax (413) 443-7548 or e-mail afeigenbaum@quality digest.com. |
