EOQ FP - Watson Gregory - C2 · Peter F. Drucker: “Because its ... “The most valuable aspect is...

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1International Academy for Quality

Quality Leadership:

Stimulus for GrowthIn a Start-up Company

Gregory H. WatsonAcademician

IAQ Symposium51st EOQ Congress23 May 2007

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International Academy for QualityQEUROPEAN

ORGANIZATIONFOR

QUALITY

Innovation – the driver of competitiveness!

Peter F. Drucker:“Because its purpose is to create a customer, a business enterprise has two,

and only two, basic functions: innovation and marketing.”

Joseph A. Schumpeter:Innovation is “creative destruction” of the past and “planned abandonment”

of the familiar way of doing things in order to embrace new opportunities.

Peter F. Drucker: “The most valuable aspect is that Six Sigma builds quality into the design so

it can be made. Six Sigma puts quality and productivity into the design from

the beginning.”

How are you planning to abandon the past?

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Product Creation

Product Realization

ManagementProcess

To our customers, we look like this...

But inside we become more complex.

$€£¥

DesiredResults

Unique challenges growing a start-up company:

AMOEBA:

A unicellular organism of 700-800 µµµµm length that is found in fresh water. It eats decaying organisms and grows in its external surface area at a rate of the square of its radius but its internal organs grow at the rate of the cube of its radius!

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But, where should you focus a start-up company?

Spark Accelerant Fuel

Creativity Innovation

SystematicInnovation Process

Invention

Fan the flame:

Time

Cumulative Sales

Sigmoid Curve

(S-Curve) Sales Growth

Grow the business:

� Simplicity: based on simple tools that are easily applied! � Flexibility: light and able to be readily comprehended and assimilated!� Scalability: able to be grown from a small acorn!� Diversity: able to appeal to a wide variety of people and national cultures!� Portability: able to adapt its business models as its growth evolves!� Consistency: able to be grown to maturity through the business life cycle!

Functional criteria – start-up company’s quality system:

Systematic Innovation Process – a growth engine:� Creativity: defining a new commercial concept that appeals to the market.� Innovation: refining a useful concept so that it is potentially profitable.� Invention: implementing design in effective, efficient and economical way.

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Delivering quality your customers can count on!

Execution Excellence

Customer Satisfaction

☺

☺

�

Competitive Q

uality

Innovative Quality

Compliance Quality

INNOVATIVE PRODUCT

COMMODITY PRODUCT

More Tolerancefor

Quality Problems

NO Tolerancefor

Quality Problems�

Region of Innovation

Region of Conformity

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Where are the gaps in your value delivery?

What the CustomerWants

What theCustomeris Promised

What theCustomerGets

Design Gap Conformity Gap

EntitlementExpectation

Customer value delivery chain

CustomerPerception

Basis of

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� Determine the job your customer needs to get done.

� Discover how your outcome influences that job.

� Divide your process into internal and external capability.

� Design a supply chain to deliver customer expectations.

� Develop process to support critical-to-satisfaction items.

Process

Capability

Supplier

Capability

Customer Experience

Input Output

OutcomeJob to

be Done Critical to Quality (CTQ) Items

Critical to Satisfaction (CTS) Outcomes

Managing your business as a process:

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Competitive quality satisfies customers!

Maximum

Profitability

due to

Quality

Product Quality(Relative to Specification = 1)

Cu

sto

me

r P

erc

eiv

ed

V

alu

e o

f Q

ua

lity

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

1.0

0.9

Zone ofCustomer

Confidence

Zone ofProduct

Competitiveness

Zone ofInadequate

Quality

Zone ofDiminishing

Returns

0.0 0.01 0.1 1.0 10.0 100.0

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Old design runs out of ‘performance space’

Y = g (X)

Y = f (X)

Cp (f) =

Cp (g)

New Design Required

Time

FunctionalPerformance

Customer NeedProcess Variation

Increased Level of CustomerPerformance Expectations

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Six Sigma: A systematic innovation process

DMADV delivers innovation in the product creation process by focusing on value delivery through new product creation, new service creation and development of new value delivery work processes.

DMAIC delivers innovation in the product realization process by optimizing and improving the performance of current products, services and the processes that deliver products or services.

Product Creation

Product Realization

ManagementProcess

DMADV DMAIC

Recognize

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Contrasting the Six Sigma DMAIC & DMADV processes:

DMAIC – Statistical Problem-SolvingDefine – what performance improvement is required?Measure – how well are we doing today?Analyze – what contributes most to our degradation?Improve – what can we do to get better?Control – how can we maintain excellent performance?

DMADV – Design for Six SigmaDefine – what is the business issue that we are facing?Measure – what alternatives do we have to consider?Analyze – what does our customer need from us the most?Design – what is the best way to deliver this requirement?Verify – can we assure continuing, reliable performance?

Six Sigma – A business innovation system

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The two innovation styles of Six Sigma:

DMADV = Disruptive Innovation

Create new capability

ProductCreation

DMAIC = Sustaining Innovation

Optimize current capability

ProductRealization

Revolutionary change

Breakthrough improvement

Dedicated project effort

Disruptive technology

Exploring new capability

Evolutionary change

Incremental improvement

Continuous work focus

Sustaining technology

Exploiting current capability

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Function Completeness vs. Effectiveness

Design need: How far do we take the design?

Complete Incomplete

Effective

Ineffective

EffectiveComplete

Design

IneffectiveComplete

Design

InefficientIncomplete

Design

Requires either completion or new design.

Requires design improvement to

achieve ideal function.

Requires that the conflict be

eliminated.

HarmfulIncomplete

Design

Ideal function by customer’s

viewpoint.

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Plan Design Produce

Launch

Plan Design Produce

Launch

Plan Design Produce

Launch

Product A

Product B

Product C

OODA

OODA

Boyd Cycle = OODA = Observe �� Orient �� Decide �� Act

The Boyd Cycle refers to the activity that occurs in a head-to-head competition and it describes how to gain time advantage that leads to market success. Acting faster than a competitor confuses them in the ambiguity of your action. The faster you introduce new technologies, functions or products, the less time your competitor has to respond and the further they fall behind in product offerings.

Boyd Cycle accelerates product development:

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So, what is quality?

Fundamentals – quality as:• Philosophy: for defining the priorities of an organization.

• Culture: for describing the means for people to work together.

• Measure: for achieving results and diagnosing process problems.

• Method: for assuring innovative outcomes and business results.

Quality dimensions:• Business Quality: producing financial results for owners.

• Elements: culture, spirit, vision, values, time priorities, etc.

• Outcome: common approach to way of working.

• Product Quality: producing service results for customers.• Elements: relationships, objectives, targets, standards, metrics.

• Outcome: consistent delivery of services at lowest total cost.

• Process Quality: producing consistent activity for colleagues.• Elements: process measurement, decision rights / delegation.

• Outcome: collaborative environment – multiplicative effect.

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Policy deployment for execution excellence!

Policy Setting

Policy Deployment

Policy Implementation

Policy Review

ExecutiveResponsibility

SeniorManagementResponsibility

SharedResponsibility

MiddleManagementResponsibility

Policy Management: The process of setting policy, implementing policy in business processes and work procedures and reviewing work activities to recognize (find and address) innovative business improvement opportunities.

Business Control System

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Quality system for delivering business results:

Aspiration Level

Compliance Level ISO 9000 Standard

Business Excellence Criteria

Six Sigma Projects

Self-Assessment

Self-Assessment

Self-Assessment

Benchmarking

Benchmarking

Benchmarking

Design Requirement: Fit Organization’s Business Model and Culture

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Strategy creates a vision that will persist:

EnvironmentalAnalysis

StrategicPlan

CustomerExpectations

InvestorExpectations

StrategicBenchmarking

OperationalPlans

- Strategic Intent- Core Competence- Process Capability- Product Line- Strategic Alliances- Technology Portfolio

Organization

- Strategic Intent- Core Competence- Process Capability- Product Line- Strategic Alliances- Technology Portfolio

Competitor

OperationalBenchmarking

Multi-Generation Product Plans

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• Productivity

• Cycle Time

• Quality Level

• Cost of Operations

• Job Satisfaction

Deliver to promise

and establish a truly

reliable organization

Internal Customer or

Next Process

Operational

• Profitable Growth

• Customer Loyalty

• Deliver to Promise

Establish a demand-

driven pull for

products and

services

External CustomerBusiness

• Shareholder Value

• Brand Value

Maximize the value

propositions of both

shareholders and

target customers

ShareholderEnterprise

Main MetricsChief ObjectivePrimary CustomerOrganizational Level

Performance Management Measurement System:

Focus on the results that must be delivered:

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People translate quality into action:

Deliver value through people competence and capability!

DesignProcess

OperationsProcess

Innovation Reliability

RealizationDefinition

Business operating model

CustomerPerception

Basis ofPeopleProcess

Excellence results fromconsistentexecution!

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That’s the theory – how does it work in practice?

• Quality principles are internalized into everyone’s way of working.

• Requirements are market-based and objectively described.

• Accountability is facilitated by clear job expectations.

• Work standards are operationally defined and well-documented.

• Service guarantees are established for each customer segment.

• Measurement and management by facts have become natural acts.

Erosion is a natural action; decay is a natural activity;

BUTquality is an unnatural act!

Artifacts of a high-performing business culture:

When pigs learn how to fly!

AND, you must sweat to achieve quality!

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What can you do to improve ‘start-up’ quality?

• Focus on your customers – understand their real requirements.

• Clearly describe customer requirements and measure how much

progress you are making toward achieving these results.

• Leverage the capability of your entire process organization – in both its

internal and external environments – build on strength in your supply

chain system to deliver results for your ultimate commercial customer.

• Manage your priorities and time and concentrate on those few areas that

will produce results – the details can follow after the architecture has been

designed.

• Document your processes and instill discipline to rigorously work this way.

Concentrate on the vital few actions that will drive results!

Build the quality system in the background. It is not a main event for a start-up business, but it will assure its future.

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Elements of success for a start-up operation:

ProjectManagement

PeopleSkills Design

Process

GreatIdea

OperatingProcessDesign

ToolsQualityApproach

EOQ FP - Watson Gregory - C2 · Peter F. Drucker: “Because its ... “The most valuable aspect is...

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