ENGM 620: Quality Management

Session Four – 18 September 2012

• Quality and Strategy

Mission & Strategy

• Def: The corporate mission outlines a firm’s values, intended markets and product, broad goals and objectives, core competencies, and strategic capabilities.

• Def: The corporate strategy states how a firm will achieve its goals and objectives

What is Strategy?

• Distinguishing strategy from tactics:– Strategy is the overall plan for deploying

resources to establish a favorable position.– Tactic is a scheme for a specific maneuver.

• Characteristics of strategic decisions:– Important.– Involve a significant commitment of

resources.– Not easily reversible.

Sources of Competitive AdvantageSources of Competitive Advantage

COST ADVANTAGE

COST ADVANTAGE

DIFFERENTIATIONADVANTAGE

DIFFERENTIATIONADVANTAGE

COMPETITIVEADVANTAGE

COMPETITIVEADVANTAGE

Similar product

at lower cost

Price premium

from unique product

The Impact of Quality on ProfitabilityThe Impact of Quality on Profitability

Low 25% 60% High

Relative market share

Rel

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33

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67

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Hig

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33

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67

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Rel

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33

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Low 25% 60% High

Relative market share

Low 25% 60% High

Relative market share

ROI (%) Relative Price Relative Direct Cost

Conclusion: Increases in quality add more to price then they do to cost.

19 28 38 107 107 108 104 103 101

14 20 28 103 104 104 104 102 100

7 16 23 101 101 102 104 102 100

Why is leadership crucial?

When goals are set, one of three things will occur:

1. People will achieve the goals and incur positive results

2. People will distort the data

3. People will distort the system

Effectiveness and Efficiency

Leaders

Doing Right Things

Ineffective EffectiveIn

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Eff

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ive

Man

ag

ers

Doin

g T

hin

gs

Rig

ht

Death(fast)

Success

Death(slow)

Survival

Managing Complex Change

ConfusionSkills IncentivesResources Action Plan

Change

Vision IncentivesResources Action Plan

Vision Skills IncentivesResources Action Plan

Vision Skills Resources Action Plan

Vision Skills Incentives Action Plan

Vision Skills IncentivesResources

Anxiety

GradualChangeFrustration

FalseStarts

Leading Practices (Leaders)

• They create a strategic vision and clear quality values that serve as a basis for business decisions at all levels of the organization.

• They set high expectations.• They demonstrate substantial personal

commitment and involvement in quality, often in a missionary-like fashion.

• They integrate quality values into daily leadership and management.

• They sustain an environment for quality excellence.

Power

The many forms include:– The power of expertise– Reward power– Coercive power– Referent power– Legitimate power

Dimensions of Leadership

• Knowledge– Diversity, learning style, ethics, coping

• Communication– Conflict mgmt, teaming, motivating,

• Planning– Decision making, evaluation, task/time mgmt

• Vision– Assessing internal, external environments, identifying

opportunities

Discussion

• What are some of the ways leaders resolve conflict in organizations? Which of these seem to be more effective?

Costs of Quality

• Prevention Costs

• Appraisal Costs

• Failure Costs

Strategic Process

Mission &Strategic Goals

Competitive Analysis * Strengths * Weakness * Opportun * Threats

SpecificStrategies * Corporate * Business * Functional

Carry OutStrategicPlans

MaintainStrategicControl

Assess EnvironmentalFactors

AssessOrganizationalFactors

Strategy Formulation Strategy Implementation

One of the Tools

Competitive Analysis

• SWOT– Strengths– Weaknesses– Opportunities– Threats

Macroprocesses

• Juran– anatomy of macroprocess does not match that of

the functional organization– Functional goals often at a heavy price of

macroprocess– There should be a clear responsibility for

macroprocess

Inspect Customer

Forced Choice Model

Organization Position•Mission•Objectives •Strengths, Weaknesses•Forecast Operational needs•Major Future Programs

Environmental Assessment•Economic Environment•Key regulatory issues•Major technology forces•Opportunities, threats•Competitor strategies

Strategic Options Action Plans

Contingency Plans

Hoshin Kanri or Policy Deployment

• The Company develops a 3 - 5 year plan• The Senior Executives develop the current

years objectives.• Catchball occurs

– The process is interactive– Teams report up– Management delivers feedback

Leading Practices (Strategic)

• Top management and employees all actively participate in the planning process.

• They customer wants and needs to drive the strategy.

• They involve suppliers in the strategic planning process.

• They have well-established feedback systems for continuous measurement and re-evaluation of the planning process.

Best (Better?) Practices

• Control the quality and operational performance of key processes used to produce and deliver products

• Identify root causes of variation, make corrections, verify results

• Continuously improve processes to achieve better quality, cycle time, and performance

• Set “stretch goals” and make extensive use of benchmarking and reengineering

Strategy, Quality, and the Supply Chain

• Logistics?– When shall we ship?– What mode of transportation shall we use?– How do we optimize our shipping practices?

Strategy, Quality, and the Supply Chain

• Suppliers?– Who are our preferred suppliers?– What is our process for supplier selection?– How do we develop suppliers?– How do we link with our suppliers?– Do we source globally?

Strategy, Quality, and the Supply Chain

• Inventory management?– Where do we optimally store inventory– How much? How long?– Do we have perishable stock?– Do we carry safety stock?– ARE we maintaining good levels of service?

Discussion

• Why might the forced choice model be useful for companies inexperienced in strategic planning?

Discussion

• What is the concept of catchball?

Discussion

• Juran argues for both incremental improvements and breakthrough thinking in the strategic plan. Do you agree?