Tito Conti

MEQA Conference

Jeddah, Kingdom of Saudi Arabia

16 April 2013

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Quality of goals

and quality of execution

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1. Identify and plan competitive value propositions.

2. Execute processes capable of generating products and services that consistently deliver the promised value.

3. Do [1] and [2] at competitive costs, time, flexibility.

We can call mission [1] «quality of goals» and missions [2]+[3] «quality of execution».

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FITNESS OF THE FULL ORGANIZATION

FITNESS OF THE ORGANIZATION’S SUB-SYSTEM

The Two pillars of Quality = Quality of The Two pillars of Quality = Quality of Goals and Quality of ExecutionGoals and Quality of Execution

Competitive value for customers/stakeholders

QUALITY OF GOALS:

DOING THE RIGHT

THINGS

CONCEIVING AND

PLANNING HIGH

VALUE FOR

CUSTOMERS,

STAKEHOLDERS

AND THE

ORGANISATION

QUALITY OF

EXECUTION: DOING

THINGS RIGHT

GENERATING AND

DELIVERING THE

PLANNED VALUE WITH

MINIMUM LOSSES AND

MINIMUM USE

OF RESOURCES

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DIFFERENTIATION

ENHANCEMENT

VARIATION

REDUCTION

Focus of quality has traditionally been more on execution (reducing defects) than on value planning.

Value planning and execution are equally important but value planning comes logically first, because it makes little sense building a perfect product if it does not attract customers for its face value.

In this presentation we will focus on customer value identification and planning.

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FITNESS OF THE FULL ORGANIZATION

FITNESS OF THE ORGANIZATION’S SUB-SYSTEM

Our focus:Our focus: PlanningPlanning for competitive for competitive value propositionvalue proposition

Competitive value proposition

QUALITY OF GOALS:

DOING THE RIGHT

THINGS

CONCEIVING AND

PLANNING HIGH

VALUE FOR

CUSTOMERS,

STAKEHOLDERS

AND THE

ORGANISATION

QUALITY OF

EXECUTION: DOING

THINGS RIGHT

GENERATING AND

DELIVERING THE

PLANNED VALUE WITH

MINIMUM LOSSES AND

MINIMUM USE

OF RESOURCES

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Action is within the first pillar, but close cooperation with the second is essential

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Planning for customer value cannot be done in global, generic terms. It must be done in specific, analytical terms.

Customer value is in fact a complex construct of the specific satisfactions and dissatisfactions related to the different “qualities” exhibited by the product, each of them associated with different levels of importance and value expectations.

Aim of this presentation is to illustrate an innovative approach to planning that experience has proved to be very effective.

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Aim of this presentation.Aim of this presentation.

In cooperation with significant groups of users,

define the user value perception tree.

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USER

PERCEIVED

VALUE

Q2 - PRODUCT

Q1 - PRE-SALE

SERVICE

Q3 - AFTER-SALE

SERVICE

Q4 - RELATIONS

Q5 - CONTRACTUAL

% value, attributed by

customers to the 1st level

branches (%)

V3

V2

V1

V4

V5

V2.3

V2.2

V2.1

V2.4

V2.5

Q2.1 - SAFETY

Q2.5 -OPTIONAL

Q2.3 - PRIMARY

PERFORMANCES

Q2.2 -ENVIRONMENT

Q2.4 - SECONDARY

PERFORMANCES

Secondary branches, product related

(2nd level qualities)

Primary branches (1st level qualities)

% value, attributed by

customers to the 2nd level

branches

The trunk

2nd and 3rd level branches of an automobile’s quality tree, completed with customer satisfaction results.

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Example of a product Example of a product quality tree . quality tree .

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Lower part: deployment of product qualities for a car.

Upper part: customer satisfaction data for own company and reference competitor.

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Cra

sh

pro

tecti

on

syste

ms

Gas

mileage

Minimum acceptance level

Best in class level

Own company Reference competitor

People safety Primary performances

Secondary performances

Op

tional

featu

res

Bra

kin

g

syste

m a

nd

ro

ad

hold

ing

Cu

sto

mer

valu

e

for

mo

ney

perc

ep

tion

Com

fort

Sp

eed

&

Accele

rati

on

Nois

e

Ap

peara

nce

Vis

ibilit

y

GPS

Ente

rtain

ment

syste

ms

CO

2 &

thin

Pow

ders

’

em

issio

n

Enviro nment Protec

tion

3rd level qualities

4th level qualities

Different dynamics for satisfiers and dissatisfiers

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The dynamics of product The dynamics of product “qualities” under the “qualities” under the

competitive pressure. competitive pressure.

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Most product qualities are intended to carry positive customer value. We call them “satisfiers”. If the value associated with such qualities happens to be below the minimum accepted value (negative value area), the producer is bound to act to bring them into the positive area.

Some qualities are negative by nature: typically failures and errors. We call them “dissatisfiers”. Ideally they should be brought to zero

Planning should address the two factors separately.

A critical point is combining them to forecast the resultant effect on the user.

Best in class level

Minimum acceptance level for

each value carrying quality

V -

V +

0

Different value subtracting qualities

(Area of DISSATISFACTION)

Sh

ift in

tim

e

Issue: reduce negative value for each quality as close as

possible to zero

Issue: increasing customer value through continuous improvement and innovation

0

Pro

gre

ss in

p

os

itiv

e c

us

tom

er

valu

e a

ug

men

tati

on

Pro

gre

ss in

ne

gati

ve

Cu

st.

valu

e r

ed

uc

tio

n

Different value adding qualities

(Area of SATISFACTION)

Qualities that extend

from the negative

to the positive value

areas (satisfiers)

Qualities that carry negative

value only (dissatisfiers)

Both the minimum acceptance level and the best in class level shift upwards in time, due to competition and users’ inurement.

Those who want to compete for market leadership must be able to rapidly perceive

when continuous improvement is sufficient

when the time is ripe for innovation.

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Both performance measurements and customer satisfaction data.

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Availability of historical Availability of historical data is of paramount data is of paramount

importance in planningimportance in planning

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Cu

sto

me

r p

erc

eiv

ed

Va

lue

fo

r m

on

ey

Time

Time

t0 t1 t2 t3 t4 t5 t6 t7

Me

as

ura

ble

pe

rfo

rma

nc

e

t0 t1 t2 t3 t4 t5 t6 t7

Own customers

Ref. competitor’s customers

Own product

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Time

t0 t1 t2 t3 t4 t5 t6 t7

Me

asu

rab

le p

erf

orm

an

ce

Time

t0 t1 t2 t3 t4 t5 t6 t7

Co

st a

sso

cia

ted

with

pe

rfo

rma

nce

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Time

t0 t1 t2 t3 t4 t5 t6 t7

Co

st a

sso

cia

ted

with

pe

rfo

rma

nce

At time t3 the decision was taken to pursue a radical

innovation (introduced at time t4) to respond to the

reference competitor’s innovation introduced at time t2.

A peak of cost is shown, corresponding to the innovation, followed by a progressive reduction

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The case of satisfiers

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The KanoThe Kano oneone--dimensional customer dimensional customer requirements diagram. requirements diagram. Typical of incremental Typical of incremental improvement based competition.improvement based competition.

Cu

sto

mer

sati

sfa

cti

on

Product functionality

One-dimensional

quality

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Degree of functionality F

Cust

om

er

perc

eiv

ed

Valu

e

_

+

Present competition range

TR

BIC

●

●

V=0 + Ft F0

(TR=Threshold; BIC= Best in class level).

Curve at time t

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Degree of functionality F

_

+

Competitive range today

TR T

BICT BIC Y

Competitive range yesterday

●

● ●

● TR Y

A competitor makes a quantum leap jump In

customer perceived value

Fo

V*

+

Cust

om

er

p

erc

eiv

ed

negati

ve-

valu

e

Fy Ft

Cust

om

er

p

erc

eiv

ed

p

osi

tive

-va

lue

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Degree of functionality F

Cust

om

er

Perc

eiv

ed

posi

tive

va

lue

_

+

Fo

Vo

The last stage of downward migration of the positive quality curve brings it into the negative bottom-right quadrant. That because users give top performance for granted and want it. In this area are also hosted qualities that are subject to mandatory quality standards.

+ C

ust

om

er

perc

eiv

ed

negati

ve-

valu

e

Ft

or, better, the lifecycle of the customer perceived value, that applies to any quality at any level of the user perception tree.

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Must be quality

Cu

sto

mer

sati

sfa

cti

on

Product functionality

Attractive

Quality

One-dimensional

quality

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The Kano model uses three diagrams to describe customer satisfaction vs. measurable performance, They refer to“ attractive quality”, “one dimensional quality”, “must be quality”.

Our approach is based on one diagram only, which shows however different characters along the so called “quality lifecycle”.

It starts with the “attractive” phase, when a discontinuity takes place in customer value, normally due to an innovative approach. Then a “competitive” phase follows, normally characterized by incremental-improvement-based competition. Finally, the “must-be quality” phase.

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We use We use one diagram only for diagram only for satisfierssatisfiers..

CU

ST

OM

ER

PER

CEIV

ED

N

EG

AT

IVE-

VA

LU

E

Life cycle of the qualities which are intended to carry positive customer value (satisfiers), from the stage of attractive to the stage of must be.

DEGREE OF FUNCTIONALITY

_

+

MUST-BE QUALITY

More mature competition.

Incremental improvements.

New attractive solution exceeds present customer

value expectations

CU

ST

OM

ER

PER

CEIV

ED

PO

SIT

IVE

VA

LU

E

Others follow

No more

- or marginal -

-competition.

P0SITIVE VALLUE AREA WERE COMPETITION TAKES PLACE

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NEGATIVE VALUE AREA

The quality lifecycle says that the same level of performance (or functionality) – that is, delivered value – leads to different and decreasing levels of customer satisfaction – that is, perceived value - in time.

The moving cause of the quality lifecycle are: Human beings get used to value: they are sensitive

to value variation more than to absolute value. Then, when the number of competitors increases

and competition gets harsher, the speed of improvement increases, innovations are more frequent, the duration of the quality lifecycle decreases.

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The Kano model defines “attractive quality” as the quality that generates high customer satisfaction if present, but it does not generate dissatisfaction if absent.

Such definition seems to apply more to optional qualities than to the most significant qualities that make the bulk of customer perceived value.

We do not consider that particular case here and use the adjective attractive for the combination of importance and uncommon customer value, that normally happens when a highly appreciated innovation is offered. That is why one curve, that varies along the quality lifecycle, is sufficient.

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Definition of attractive qualityDefinition of attractive quality

Qualities that carry negative value only, by their own nature. Typical are failures and errors.

They cannot be measured independently, but only by estimating the reduction in customer satisfaction that they induce.

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The must-not-be negative quality curve is derived indirectly, starting from Vp (perceived value in absence of dissatisfiers); then estimating the reduction ∆Vx due to dis-functionality Dx. The resultant perceived value is VR. The curve in the lower quadrant is made taking ∆Vx as the ordinate corresponding to abscissa Dx.

MUST-NOT-BE NEGATIVE QUALITIES (INTRINSIC DISSATISFIERS)

Degree of dis-functionality

Cust

om

er

perc

eiv

ed

negati

ve-

valu

e

_

+

Fo

Vo

+

“Must-not-be” negative-quality

VP

DX

VR

∆VX P

Do ∆VX

VP

It does not make any sense measuring dissatisfaction alone.

Dissatisfaction due to dissatisfiers is a subtractive element of a normally positive whole.

What makes sense is measuring satisfaction reduction due to dissatisfiers. Such quite peculiar “measurement” is in fact an estimate resulting from dialogue and deep analyses with expert users.

That issue is particularly important for high- tech products, where time-to market often conflicts with residual failure/defect rate.

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The higher the customer perceived value, the less it is affected by dissatisfiers. But quantification of the impact and identification of the right balance can only come from close dialogue with the users.

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Custo

mer

perc

eiv

ed

valu

e

Functionality Defectiveness

-

V3

V0

P2

SATISFIER AREA

DISSATISFIER AREA

AREA OF EMIPIRICAL COMBINATION OF SATISFIERS AND DISSATISFIERS

d3

Incremental improvement

d2

F0

P3

V2

∆V2

D3

∆V3

●

● ∆V3

Attractive value due to innovative solution

●

D2

∆V2 P1

F2

V1

F1

The dynamics of planning for customer value is complex. Understanding and mastering it is a critical factor for success in the marketplace; and the more so in highly competitive market sectors. The main requirements are

Learn to think in terms of customer value, not just

defect rate reduction. Learn to classify product qualities from the user

perspective: importance, value for money, expectations, dreams, customer perception tree...

Get a deep understanding of the dynamics of user perceived value (when possible, value for money) versus measurable performance for the different product qualities.

Think in terms of satisfiers and dissatisfiers, their combinations. And have the quality lifecycle in mind.

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Carry on systematic surveys of own and target competitors’ customer satisfaction.

Be as close as possible to users (not just own customers). Talking to competent users is not only a precious source of information about applications, but the most effective approach to choose among different alternatives in relation to customer value planning (typical, the balance between time to market and defect rate reduction).

Do not rely too much on questionnaires. They cannot give what dialogue with users does. Questionnaires should be used at a later stage, that of check of hypotheses.

Do not rely too much on mathematical algorithms in the planning phase. They may look elegant but, again, there is no substitute for direct dialogue with customers.

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THE END