Products, Business and Quality Issues

© Copyright CSBI Gaetano D'Emma 2001-2004 - www.csbi.ch - p. 1 of 35

Products, Businessand Quality Issues

Dr Gaetano D'Emma, CSBIPresented at the Department of Electronics,

Computer Science and Systems,University of Bologna on November 26, 2004

Purpose

How could or should a young engineer move himself within today's business world ?Explain the different quality approaches.Use the product development as an illustration.Management issues based on personal experience.


Topics of Discussion

I. Personal backgroundII. Usual business approach and quality issuesIII.New business model and total quality management

I - Personal Background

Consultant since 2001Industry, 1981- 2000– Project Manager– Product Manager– Service Marketing Manager– Customer Value Manager

University, 1969-1981– Physics, MSc– Theoretical Physics, PhD– Applied Optics


Academic Experience 1969-1981

Physics, Université de Genève, Switzerland– Student, MSc, 1974– Assistant, Theoretical Physics– PhD, 1979

Applied Optics, France– Assistant professor, Université de Franche-Comté,

Besançon, France– Invited professor, Ecole Supérieure d’Optique,

Université de Paris XI, Orsay, France

Industrial Experience 1981-2000

Landis & Gyr, Headquarters, Switzerland– Project Manager, Mathematics & System Theory– Product Manager, Building Automation– Service Marketing Manager, Landis & Gyr Italia, Milano– Service Marketing Manager, Building Automation

Siemens Building Technologies, – HVAC Products,Customer Value Manager


II - Usual Business Approachand Quality Issues

Marketing-Mix

Product– Name, functions, quality, styling, packaging, size, warranty

Placement– Distribution channels, logistics, warehouses, stores

Promotion– Targets, publicity, communication means

Price– List, discount policy, payments, credit

Four P's, McCarthy, 1978


Marketing Management

Analysis– Market– Competition– Market Needs Identified

Product– Specifications– Product Design and Development– Manufacturing

Sales– Distribution channels– Promotion– Post-sale service

Quality - Definitions

The standard of something as measured against other things of a similar kind.The degree of excellence of something.A high level, an usually good characteristic, a special feature.How good or bad something is.There is a subjective appreciation !


Subjective Appreciation

Perception:the ability to see, hear, or become aware something through the senses.Expectation:a strong belief that something will happen or be the case in the future.

Perception vs. Expectation

A product or a service can be of the highest quality if it

meets the expectations of its consumers, given the price

range and intended use.


Example : An Airline Seat

A First Class seat on a regular flight does not offer better quality than an Economy Class seat on a charter flight.Each is offering a different service to a different type of customer.

How to Measure Quality ?

It can be measured by the extent to which the flight meets customer expectations :

– Price– Check-in facilities– Departure time– Size of seat– Food and beverages– Flight attendants service– Time-keeping– Etc.


Setting Standard

Is 98% too high ?100 independent manufacturing steps results in a final product with 13,2% accuracy (= 0,98100).Drinking water would result unsafe 8 days per year.10 words would be misspelled on a page containing 500 words.

Quality Control

Inspection of goods and services to make sure that what is being produced is meeting all expectations.Statistical Quality Control :System of maintaining standards in manufactured products by testing a sample of the output against specification at the end of the manufacturing process.But …


Late

Statistical Quality Control happens at the end of the manufacturing process.It is too late !Why ?Because it results in defective products received however by customers.

Expensive

Statistical Quality Control results in tangiblecosts :– materials,– labour hours,– delayed deliveries, etc.

And in intangible costs :– customer dissatisfaction,– employee dissatisfaction,– lost customers,– lost sales, etc.


Quality Control

What to Improve ?Consider the different processes in an operation.Inspect the processes, not only the final product.

How to Improve ?Where mistakes are being made ?Why mistakes are being made ?How to avoid recurring mistakes ?

Process

A sequence of activities that achieves a business result or a key "outcome".Processes correspond to natural business activities, but are often buried in organisational structures.


Where Do We Find Processes ?

Major processes typically cross organisational

boundaries to complete the desired business outcome.

Business Process

Market – Analysis– Competition– Requirements identified

Product– Specifications– Product design and development– Testing– Manufacturing

Sales– Distribution channels– Promotion– Pre-sales and post-sales services


How to Improve Processes ?

Establish cross-functional teams.Identify and describe the processes.Measure and analyse the processes.Focus on the "what" and "how", not "who" and "where".

Total Quality Control (TQC)

Inspection of processesPreventative actionsMeasure and analyse failures

Use a TQC system :Management system in which all employees in alldepartments improve quality and procedures to give customers products and services which are– most economical,– useful and– of best quality.


Example: Electronics Industry

80'sOwn production of electronic componentsSuppliers deliver raw material.Procurement contractQuality of finished goods

TodayOutsourcing to third companiesSuppliers deliver added-value components.Partner contractTotal quality of processes

Link with Product Development

Manufacturethe

product

Delivertheproduct

Selltheproduct

Createnewproduct

Identifya newneed

Marketing R&D Operation Logistics Sales

Supplier


Link with Product Development

Manufacturethe

product

Delivertheproduct

Selltheproduct

Createnewproduct

Identifya newneed

Marketing R&D Operation Logistics Sales

Partner

Total Quality Control

Implement a supplier management system.Keep the Statistical Quality Control at the end of manufacturing process.


Supplier Management

Measure the suppliers through key indicators !Categories :– Sales– Quality of the delivered components– Logistics– Technology

Criteria :– Performance– Service– Support– Co-operation– Environment

Paradigm Shift

Suppliers of components with added-value become part of the business chain.Suppliers deliver more than a product, they deliver a service:– involvement in design phase of final product– order process– delivery in-time and accurate– invoice process

The quality of the whole process is relevant, not only the quality of the delivered components.


Paradigm Shift

Cultural change: From product to service.Service is produced and consumed at customer site.The value is perceived and determined by the customer.Service is delivered by people.

Service : A Definition

A service is a series of activities that normally take place

in interactions between the customer and employees,

physical resources, goods and systems, and which are

provided as answers to customers' needs.

C. Grönroos, Service Management and Marketing (1990)


Computer Industry in the 80-90's

MainframesMini-computersWorkstationsLocal area networksNotebooksPalm computersMobile phones

Proprietary systemsSpecific developmentStandard applicationsClient-server technologyData exchangeRemote accessSMS, MMS, video, etc.

Where is the paradigm shift ?

80's

90's

Paradigm Shift in the Computer Industry

Early 80's - Maintenance contract for the hardware

–Check–Backup–Clean the computer–Spare parts–Emergencies

Post-salesOwn people

Today - Service contract for the whole IT solution

–Audit–Consulting–Implementation–Training of users–Yearly upgrades included

Added-valueOutsourcing


III - New Business Model andTotal Quality Management

Time taken for a technology innovation to be adopted by 10 million users

Pager 41 yearsFax machine 22 yearsCellular phones 9 yearsCompact disks 7 yearsPersonal computers 6 yearsBrowser 0.83 year (10 months)

Technology Adoption


Importance of Information

Rapid business changes request to adequate the information technology infrastructure in record time.New telecommunications capability are necessary to conduct complex business operations across geographically distributed locations.Information sharing is the means to reach business results.

From Industrial to Information Age

Industrial AgeFactors of production: land, labour and capitalCentralisationPyramid power structureMainframesStandardisationMass productionBased on muscle

Information AgePrimary resource is knowledgeDecentralisationDelegation of authorityNetworksIndividuationMass personalisationBased on mind


Usual business approach is dead !Why ?Actual business world requests new business models.

New Environment

New Business Models

Industrial Age Information Age

Competition ProductsServices

Business Processes

Control Producer Customer

Barriers Financial capital Intellectual capital

Pricing Local Global, real-time


How to Create a New Model ?

Transform the marketing-mix (four P's) :– Product– Promotion– Placement– Price

Add Customer Relationships.

Transform the Marketing-Mix

ProductName, functions, quality, styling, packaging, size, warrantyAvailability of product related information on-line

PlacementDistribution channels, logistics, warehouses, storesOn-line order processing, secured on-line payment

PromotionTargets, publicity, communication meansUse of on-line advertising, links with other organisations

PriceList, discount policy, payments, creditCustomisation of prices on-line, on-line negotiation


Add Customer Relationships

Provide on-line customer service.Identify and track customers to provided customised services.Create on-line forums for customers.Enable on-line feedback from customers.

Focus on Customers

CustomerSatisfied ? Y ⇒ Retention

N ⇒ Risks

Customer Value Management

BuildProducts andServices

DeliverProducts andServices

Service theCustomer

CreateNewOfferings

CustomerNeedIdentified

Innovation Process Operations Process Post-sale Process


Managing Risk

Any organisation faces an array of security, safety and other potential loss exposures. Managers need to understand these threats and the options available to counter them.This provides a basis for deciding which protective measures and expenditures are justified in relation to the risks identified.It increases the added-value as perceived by the customers.

Satisfaction vs. Value

Customer Satisfaction Approach– Focus on how to satisfy people who are using our products

and our services.Customer Value Approach– Focus on how people choose among competing suppliers.


Customer Value Questions

What are the key buying factors for a customer when he chooses among our competitors ?How does a customer rate our performances vs. competitors on each key buying factor ?

Total Quality Management (TQM)

Total Quality Management integrates quality control and total quality control further completely into an organisation.

Total Quality Management focuses on: – Customer satisfaction– Continuous improvement– Employee involvement– Results orientation


TQM – Customer Satisfaction

Consider both current and future customer needs.

Develop new products and services that customers might not think of on their own, but which they would respond positively to.

Exceed customers' expectations !

TQM – Continuous Improvement

All processes are constantly under examination.

Everyone in the company is committed to the concept of continuous improvement.

Do right 1st time, improve 2nd time !


TQM – On-going

Focus on the critical issues.Improve in closing identified gaps.Implement the solution.Evaluate again.Start again the whole cycle.

TQM – Involvement

Everyone in an organisation must be committed.Achieving this commitment is not easy and takes a long time.Organisations need strong leadership and commitment from the top.


How to achieve TQM ?

Recognise that improvement of processes must be on-going.Improve customer satisfaction.Measure both customer and employees feedback.Implement a Quality Management System !

ISO 9000 Standards

Created by the International Organisation for Standardisation (ISO) in Geneva, adopted by countries in 1987.

Based on the standardised quality assurance system BS5750 created by the British Standards Institute (BSI) in 1979.

New revisions since December 2000.


The New ISO 9000 Standards

ISO 9000:2000QMS – Fundamentals and vocabularyISO 9001:2000QMS – RequirementsISO 9004:2000QMS – Guidance for performance improvement

QMS: Quality Management Systems

ISO 9000 – Benefits

The new ISO 9000 standards takes into account business and process improvement, as well as customer satisfaction.An ISO 9000 certificate is proof that customer requirements have been taken into account.ISO 9000 helps to guarantee day-to-day quality.


Quality Management Principles

1. Customer focus2. Leadership3. People involvement4. Process approach5. System approach to management6. Continual improvement7. Factual approach to decision making8. Mutually beneficial supplier relationship

ISO 9000 – Limits

The ISO 9000 standards were never designed as key success factors for building an industry leader.The ISO 9000 standards ignore critical indicators such as business results and issues concerning people and society.


European Foundation for Quality Management

In 1989 14 European leading organisations decided to join their effort to develop a holistic management framework.Vision: A world in which organisations in Europe excel.Mission: To be the driving force for sustainable excellence in organisations in Europe.

14 Leading Organisations

BT plcRobert Bosch GmbHBull SACiba-Geigy AGDassault AviationElectrolux ABFiat Auto SpA

KLM Royal Dutch AirlinesNestlé SAPhilips Electronics NVIng. C. Olivetti & C. SpARenaultGebr. Sulzer AGVolkswagen AG

Founded in 1989 by 14 leading European organisations


Business Excellence Model

Holistic management framework means :A framework to make sense of the vast range of initiatives we all have.A set of organisational beliefs or values.A basis for thinking about, discussing and improving our organisation.A framework for analysing an organisation and benchmarking with others.A basis for a management system.

Eight Fundamental Concepts

1. Customer focus2. Partnership development3. People development and involvement4. Management by processes and facts5. Continuous learning, innovation and improvement6. Leadership and constancy of purpose7. Corporate social responsibility8. Results orientation


The European Foundation for Quality Managementis a not-for-profit membership foundation,

is the creator of the EFQM Excellence Model,manages the European Quality Awards, andis a resource to European organisations on business and continuous improvement disciplines, tools and techniques.

1. Customer focus2. Partnership Development3. People development and

involvement4. Management by processes

and facts5. Continuous learning,

innovation and improvement 6. Leadership and constancy

of purpose 7. Corporate social

responsibility8. Results orientation

1. Customer focus2. Leadership3. Involvement of people4. Process approach5. System approach to

management6. Continual improvement7. Factual approach to

decision making8. Mutually beneficial supplier

relationship


Conclusion

Key Buying Factors

Besides product issues :Speed of response to inquiryOrder processing and accuracyDelivery cycle, on-time, damage-freeOrder receipt and follow-upInvoice accuracyRepairs processLevel of complaints


Quality Issues

Different quality approaches :– Definition of quality– Statistical Quality Control: Limits– Total Quality Control: Consider processes

Use the product development as an illustration :– Product Development: Business sub-process– Suppliers: Business partners– Services: Focus on customers

Conclude with Total Quality Management :– Customer satisfaction– On-going improvement– ISO 9000:2000 and

Virtuous Circle

Customer more loyal leading in turn tohigher profits and more satisfied employees,who serve customers better.


Adaptability is Critical

-- Charles Darwin

It is not the strongest of the species that survives, nor the

most intelligent; it is the one that is most adaptable to

change.

References

Strategy Maps, Robert S. Kaplan and David P. Norton, Harvard Business School Press, Boston, 2004

The Balanced Scorecard, Robert S. Kaplan and David P. Norton, Harvard Business School Press, Boston, 1996Introduzione al Marketing, Anna Claudia e Giorgio Pellicelli,Sperling & Kupfer Editori SpA, 1993, II Edizione

Sette Strumenti Manageriali della Qualità Totale,Alberto Galgano, Il Sole 24 Ore, 1999 http://www.galganogroup.it

International Standard Organization ISO, Geneva, http://www.iso.org

European Foundation for Quality Management, EFQM, Bruxelles, http://www.efqm.org

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Products, Business and Quality Issues