Monday, January 30, 2006

The Future of Quality

We’re five years into a new millennium, and we’re all still waiting for the “next big thing” to show up in the quality world. Six Sigma? TQM? ISO 9001? They’re so 20th century. Because of my position with Quality Digest, I am frequently asked what the next big thing will be. Apparently, being a columnist makes one somewhat of an oracle. If only that were true, I’d being driving a Lexus instead of a Toyota.

Although I don’t know what the next big thing will be, I suspect that it will have something to do with a focus on a return to the basics of quality and sound business management. After all, it doesn’t matter how slick your quality system is, without a profit, you won’t be in business for long.

I also believe that it’s time to re-examine the very basics of quality itself, starting with the definition of quality. The most popular definition of quality is Philip Crosby’s “conformance to requirements.” There are a number of other definitions out there, but they’re pretty similar to Crosby’s.

Crosby’s definition of quality was written in the 1960s. Much of the rest of our thinking about quality came from the 1920s (Walter A. Shewhart and the gang at Western Electric), the 1940s (Joseph M. Juran and W. Edwards Deming) and the 1950s (Armand V. Feigenbaum). Sure the Japanese kicked our butts in the 1970s, the 1980s, the 1990s and . . . well, you get the picture, but most of the quality lessons we learned from them were the same ones they learned from Juran and Deming following World War II, it just took us a bit longer to get the message.

Over the years, consultants have picked ideas they liked best from these gurus and repackaged them into things like ISO 9000, Total Quality Management and Six Sigma, but is there anything really new here? For example, most of the statistical and data analysis tools and techniques that form the heart of Six Sigma have been around a very long time.

As I said earlier, we’re five years into a new millennium. Isn’t time for new thinking? Not only has the calendar changed, but so too has the very foundation of our economy. Manufacturing is this country is disappearing faster than beer at a fraternity party. Whole industries have disappeared and whole new ones have come to life. Yet, our thinking about quality is still rooted, for the most part, in the 1920s.

Of course, statistical methodology doesn’t become obsolete, but are there new ways to apply it? Don’t new industries, new business models, new types of organizations demand new ways of measurement, accountability and quality analysis?

For example, how do we accurately measure customer satisfaction when we never see or hear our customers? Some very large businesses are practically virtual. Customers never enter their physical site, rarely call them and only interact with them electronically. Even traditional bricks-and-mortar businesses have outsourced much of their customer relationship management to third parties, which may be as far away as India.

Will the tools and techniques from the last millennium work in this one? Is the work force of today ready for the quality challenges of tomorrow? Do we even know what those challenges will be?

It used to be relatively easy to deal with problems: you walked out of your office and stepped onto the plant floor. You could talk with the manufacturing engineer, see how the machine operator performed his or her job, watched the product move from raw material and one end of the line to packaged good leaving the plant at the other end. Now your plant may be half a world away. Your designer may be in India, your machine operator in China and your customer in Japan. How do you ensure quality design, manufacture, shipment and customer satisfaction?

It’s fashionable for corporate America to downplay the role of the quality professional. It’s even fashionable for some to say that quality is disappearing as a function within organizations. But I think the quality professional’s role is more important today than ever before. It’s just evolving, whether we want it to or not.

We need an open, active, lively discussion of the role of the quality profession and what quality is and will be in the years to come. I encourage the American Society for Quality, as the professional society for quality, to take up this challenge. Survey your members, senior management, customers, suppliers, governments, information technology departments, education institutions and any other organization that is involved in this thing called quality. Discuss these issues at section meetings, division conferences and the annual conference. Find out what your members need to be successful now and in the future. Redefine quality for the 21st century.

I also encourage Quality Digest to investigate and report on the future of the quality profession and the changing role of the quality profession.

I want to know what you think about these questions. How do you define quality? How does your organization manage for quality in the 21st century? How is your job as a quality professional evolving? Is ASQ meeting the needs of the quality profession today? What do see in your quality crystal ball for the future?

Wednesday, January 04, 2006

The Cost of Quality

How much do you pay for quality? OK, that’s a loaded question. Do I mean how much does quality “cost” your organization or how much are you willing to pay for a “quality” product? Are these two questions related? And, does the cost of quality affect the price of the good or service I produce? Does my demand for a quality product determine the price I am willing to pay?

These questions are particularly relevant in today’s fast-changing global economy. As consumers, we are faced with making economic decisions based on a variety of factors: price, features, quality, availability, etc. For example, the cost of product seems to be more important to many U.S. consumers than their desire to keep manufacturing jobs in the United States. The desire to buy “Made in the U.S.A.” goods doesn’t outweigh the desire to pay the lowest cost for goods or to have products with the latest and greatest features and a long, trouble-free lifespan (the key to success for Japanese manufacturers).

The cost of quality to a consumer isn’t usually a conscious decision. It generally comes from personal experience with a company or product or the product’s reputation. For example, you might hear someone at the Honda dealer say, “I drove my last Honda Accord for 10 years and never had any trouble with it. Therefore, I’m going to buy another one.”

Generally speaking, consumers are willing to pay more for quality, but only as much as they need or can afford. That’s why the Toyota Camry consistently outsells the Roll-Royce Phantom. However, both meet the quality needs of their respective buyers.

As businesspeople, we must make economic decisions based on many factors: the cost of labor, competition, market share, return on investment, quality, etc. Although quality isn’t as high on the CEO’s to do list as most quality professionals would like it to be, I believe that they do make decisions regarding quality. Unfortunately, rather than asking “What is the price of quality?” they ask, “What is the cost of quality?” This is a critical distinction. Because organizations that view quality as a cost instead as an investment are missing the bigger picture. The same executive who decides to build a $400 million factory because he realizes the profit it will produce may balk at spending $5,000 on quality training or $10,000 on customer surveys or $25,000 for a new coordinate measuring machine. When Corporate America thinks quality, it thinks cost.

U.S. business looks for the least expensive way to “buy” quality. And as we all know, you get what you pay for. On the other hand, Japanese business regards quality as an investment. Japanese managers actively look for ways to build quality in to product design, to continuously improve processes, to reward workers for quality initiatives.

In Japan, quality is everyone’s job because quality is viewed as a key element of the organization. In the United States, quality departments are disappearing and quality is becoming “everyone’s” job merely as a means to save money, not to invest for the future.

Here’s another interesting way of looking at the cost/price of quality. At Toyota, quality is a key element of the organization. In fact, Toyota regards quality as a top priority. Toyota’s investment in quality from design through manufacture and on to delivery is enormous, yet its products are competitively priced (because Toyota’s investment in quality yields huge money-saving returns) and it is poised to become the world’s number one automaker. Toyota has the highest possible bond rating, and its profit is estimated to be $10 billion this year. Contrast that with General Motors. GM is expected to lose $4 billion and has the worst possible bond rating. GM is forced to offer huge incentives to sell its products, is downsizing, losing market share and blaming the competition, the workforce and even the consumer for its decline. Which automaker has made the best “investment” in quality?

Many blame the U.S. workforce for the huge disparity between these two automotive titans. Nonsense. Many of the Toyotas driven in North America are built in North America. Plus, many of the Toyotas driven in North America are designed in North America. Toyota and other Japanese automakers may enjoy a slight advantage in the cost of labor compared to GM and Ford, due primarily to lower health care and benefit costs, but this doesn’t explain such huge losses in sales and market share.

Unless U.S. manufacturing begins to see quality as an investment for its future success, it will continue to lose out to those who have figured it out. The Japanese quality revolution in the 1980s was a powerful wake up call for U.S. industry. Unfortunately, we seem to have hit the snooze button and rolled over.

What do you think of the price of quality? How invested in quality is your organization? Will we wake up in time to reverse our decline? Let me know what you think!