center for quality of management journal · quality, reliability, and manufacturing operations....

CENTER FOR

QUALITY OF MANAGEMENT

JOURNAL

Vol. 6, No. 2

A Message from the Chair

TQM in Service: A Report by the CQM Study Group

Quality 1 on 1

Emotions: At the Heart of Business Practice

Self-Generated Competitive Innovation with the Language-Action Appproach

FALL 1997

David Walden

Victor S. AramatiToby Woll

Richard LeVitt

Rafael Echeverria

Robert Dunham

CENTER FOR QUALITY OF MANAGEMENT JOURNAL

2 FALL 1997 VOL. 6 NO. 2


VOL. 6 NO. 2 FALL 1997 3

MESSAGE FROM THE CHAIR

Broadly speaking, all of the papers in this issue are concerned with what it means to satisfy acustomer and how to improve the processes we use in organizations to better satisfy customers.

The first paper in this issue of the CQM Journal, ÒTQM in ServiceÓ by Vic Aramati and Toby Woll, isa report on a CQM study on TQM in the service industry. Several years ago it became clear that anumber of CQM member companies saw TQM as taught by the CQM as being mainly aimed atmanufacturing and not applying easily to service industries. In particular, there was a view that inservice industries it is difficult to create step-by-step processes such as were perceived to be used inthe manufacturing industry and to which it was perceived that TQM mainly applies.

The TQM in Service Study came up with an interesting result. Companies in service industries haveseveral different types of processes:l some processes are ÒoperationalÓ and can be made step-by-step, just like a process on the

manufacturing floor l some processes are Òmoment of truthÓÑface-to-face with a customer and with the imminent

potential to leave a customer satisfied or unsatisfiedl some process are ÒcreativeÓ or Òinnovative,Ó creating new knowledge.Each of these different types of processes has some different characteristics that need to beconsidered when trying to improve the process, and there are ways to make each type of processmore explicit (even if not exactly step-by-step) and for improving each type. Finally, the study groupcame to the conclusion that these three types of processes also exist in manufacturing industryorganizations.

The second paper, ÒQuality 1 on 1Ó by Richard LeVitt, describes some new thinking at Hewlett-Packard about how to satisfy customers. In particular, the paper describes an approach to extendingthe definition of customer satisfaction to include the customerÕs entire experience with a product orservice, including the customerÕs feelings or emotions resulting from the experience.

The third paper, ÒEmotions: at the Heart of Business PracticeÓ by Rafael Echeverria, concentratesparticularly on the importance of becoming more aware of the emotional component that is part ofevery business interaction, both within the organization and with people outside the organization.

The final paper, ÒSelf-Generate Competitive Innovation with the Language-Action ApproachÓ by BobDunham, concentrates on the importance of innovation in making organizations better able to satisfycustomers and in particular on a language-based approach to bring more explicit methods to theprocess of innovation.

Although the LeVitt, Echeverria and Dunham papers were written independently of each other, theyseem quite related. I suggest reading each in turn and then going back to think about them alltogether.

All of the concepts and methods described in the last three papers are plausible candidates forimproving the three types of processes described in the first paper.


4 FALL 1997 VOL. 6 NO. 2

CENTER FORQUALITY OF MANAGEMENT JOURNAL

VOL. 6 NO. 2 FALL 1997 5

Victor S. Aramati is thedirector of Customer &Partner TelephoneSupport at DIGITAL’sProducts Division and isresponsible for improvingthe Ease-of-Doing-Business with DIGITALthrough all forms ofcustomer and partnertelephone contact forsales, marketing, and pre-sale technical supportworldwide. Vic joined DIGITAL in1984 where he has heldnumerous positions inQuality, Reliability, andManufacturingOperations. Prior tojoining DIGITAL, Vicspent 15 years at AT&TBell Laboratories.

Toby Woll is a CQMfellow and the formerexecutive director of theCQM. She has workedextensively to integrateTQM with RussellAckoff’s InteractivePlanning Process, andconvened the TQM inService study group,acting as sponsor andfacilitator of the group’sefforts. She has beeninvited to present findingsto CQM courseparticipants, the UnitedWay of America, andgroups of corporateexecutives.

TQM IN SERVICEA REPORT BY THE CQM STUDY GROUP

Written by Victor S. Aramati, Digital Equipment Corporation and TobyWoll, Center for Quality of Management with profound thanks to all themembers of the Center for Quality of Management’s TQM in ServiceStudy Group

“Every enterprise is a service company.”

The last decade has seen notable changes in quality approaches in NorthAmerica. There has been a significant migration from an emphasis onerror/cost reduction (i.e., quality in manufacturing) toward corporatewide, growth-enhancing approaches aimed at providing strategicadvantage in the marketplace. This paper discusses the tailoring ofTQM to mesh with these new approaches, specifically in businessesthat are part of the service sector.

FIGURE 1: Model for Managing and SustainingExcellence


6 FALL 1997 VOL. 6 NO. 2

The Service Model

The objective of qualitymanagement is no longer justreducing defects, but ratherincreasing the value thatcustomers receive on a sustainedbasis. Companies that havesuccessfully implemented state-of-the-art quality programsbeyond the confines ofmanufacturing have recognizedthis difference. They haveaugmented manufacturing-oriented techniques and madequality a major strategicadvantage by applying its tenetsto realize their businessobjectives.

The model for excellence shownin Figure 1 on page 5 is based onrecent CQM research projects.

At the heart of this model arecustomers and partners. One sideof the triangle establishes thevital link between quality system

implementation and thecompany’s business planningand management. In the 1996spring CQM Journal(Vol. 5, No.1) are articles describing thework of CQM companies tointegrate Russell Ackoff’spowerful strategic planningprocess, Interactive Planning,with the operational strength ofTQM. The articles by ThomasPowell listed in the bibliographyare also interesting on this point.

The second side of the trianglerecognizes the central role ofcultural pathways amongemployees and customers.Discovering these pathways andtaking them into account helpsenhance emotional commitmentto desirable or necessarysystemic changes. You can finddiscussions of differentdimensions of these issues in the1995 winter CQM Journal(Vol.4, No. 4) and in articles

describing the work of ClotaireRapaille written by Bemowskiand the American QualityFoundation.

The base of the triangleconfirms the importance of thesubject of this paper: tailoringand optimizing TQMapproaches for each individualbusiness. A “one-size-fits-all”formula never fits all.

The Journey

CQM’s research project ontailoring TQM to servicecompanies’ needs got underway on March 29, 1994. TheCQM Service Study Groupconvened in response to CQMmembers’ wishes for betterunderstanding of theapplication of TQM in theservice sector.

TABLE 1: Study Group Members


VOL. 6 NO. 2 FALL 1997 7

The members of the study groupare listed in Table 1 on page 6.

The Angst

The study group membersidentified a range of sharedconcerns:

l They had all found it difficultto implement TQM programsthroughout their organizationsafter the 6-Day Course.

l Most of the examples used inthe 6-Day Course reflectedexperiences frommanufacturing companies.These examples did not seemrelevant to serviceorganizations’ needs.

l Some members had stumbledin trying to apply the 7-StepProblem Solving techniquesand metrics to theirenvironment. Their internalbusiness processes were notclear or were hard to describe,and the processes tended tochange frequently. Therefore,

improvements in serviceprocesses were hard toachieve. The study groupmembers found that if youcan’t map it, you can’tmeasure it; and if you can’tmeasure it, you can’t improveit.

l Some members wanted tofocus on process mapping butwere unable to tie Voice of theCustomer (VOC) techniquesand business processmanagement together in ascheme for added customervalue.

l Study group membersrecognized a strong linkbetween customer satisfactionand employee satisfaction.They wanted to understand ifthis link affects the servicesector in some unique fashion.

l Members indicated difficultieswith gathering data formeasuring quality of service.They realized thatperformance data was lost

when calls/contacts passedfrom hand to hand.

lMembers found that theirorganizations, as serviceproviders, had to understandthe customers’ processes inorder to succeed.

lMembers indicated that theirservice organizations (or forthat matter, any unit within anorganization that lay outsideof manufacturing) haddifficulty using the TQM toolsto benefit their customers.

l They felt a general need tounderstand better theapplication of TQM in aservice environment.

The Process

Following the approach usedsuccessfully by other CQMstudy groups, we agreed to theactivities shown in Figure 2.During the initial meetingsover several months, thestudy group researched and

FIGURE 2: Research Development Methodology


8 FALL 1997 VOL. 6 NO. 2

reviewed the work of thoughtleaders in the area of managingfor service excellence. ChristineMaurer did a literature searchand summarized key articles.Christine’s summary is availablein the CQM library; a morecomplete bibliography isincluded at the end of thisarticle.

To ground the discussion inexperience, each of theparticipating companiespresented key insights orinitiatives:

l Vic Aramati describedDIGITAL’s work toreengineer five core processesand DIGITAL’s use of theprocess Palettes and SixSigma. In addition, Vicdiscussed the need to providebackup systems to support andempower employees so thatthey, in turn, can createsatisfied and securecustomers. Digital hadrecognized that to reassure thecustomer the employee mustfeel secure.

l Synetics described theirinitiative to developpromotion criteria to ensurethat management had theappropriate skills to manageprocesses and people.Synetics also shared theirqualitative customer surveyresults, which highlighted thecompany’s need for clearprocesses. Finally, Syneticsdescribed one of theirdiscoveries: What theythought was a processproblem in their help deskapplication turned out to be acommunication problem.

l One member described theinternal survey they had doneto identify how to promotemanagers who hadappropriate skills.

l Keane presented theirexploration of importantthings to consider indetermining how to measureservice quality; for example,they had the idea of surveyingemployees to find out whatthey liked about theircustomers.

Several themes began to emergeas common to all theparticipating companies’ effortsto meet customer needs:

l Timeliness of information

l Efficiency of processes

l Link between customer andemployee satisfaction

l Lack of knowledge about anduse of process management

We began to think that if wecould develop an effectivediagnostic model, it would beeasier to develop tailoredsolutions for achievingexcellence in service delivery.

The LP

To validate the appropriatenessof the issues the case studies andreadings had surfaced, eachcompany committed to doing aLanguage Processing (LP)session with a diverse group ofemployees who providedservice. The question each LPgroup was asked was:

What are the impediments thatkeep you from serving your

customers on a daily basis?Of particular value was an LPeveryone could relate to. It wascompleted with employees fromsales, marketing, help desk, andoperations departments. Figure3 on page 9 gives the LP reportas it was presented. The insightsand conclusions were the subjectof intense discussion andlearning. Some key themes fromthe LP:

l Insufficient staff

l Insufficient data

l Communications difficulties

l Tendency for staff to learnfrom the customers what thecompany is doing before theyare told by the company

l Policy and standardizedprocess constraints

l Lack of clarity about who isresponsible for customersatisfaction

Potential Solutions

At this point in the researchprocess, the study group decidedto identify the specific elementsthat had an impact on servicedelivery. Based on our currentunderstanding, we hypothesizedthat the following elements wereimportant, and that the followingknown quality methods couldaddress them.

Employee Satisfaction(addresses the link betweenemployee and customersatisfaction): We knew thatthere was an emotionalcomponent to be calculatedboth for employee satisfaction


VOL. 6 NO. 2 FALL 1997 9

FIGURE 3: LP Completed by a Cross-Functional Team


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and for customer satisfaction.To the degree that there wasdata to show that there was acorrelation between employeesatisfaction and customersatisfaction, we hypothesizedthat the former could be abarometer for the latter. If thisproved true, then one solutionsuggested would be to usesurveys and other systems fortesting the level of employeesatisfaction as an early warningsystem for the levels ofcustomer satisfaction. We alsothought that it was critical toaddress the reward andrecognition system forindividuals and teams in theservice environment. (Digital,Keane)

Management Skills: Theability of managers toeffectively manage programsand drive change in anenvironment where employeesare confronted with the realityof customers who are “here-and-now” seemed veryimportant. It seemed criticalthat managers have a processorientation and act as shockabsorbers for their directreports. Managers needed totake responsibility for fine-tuning the system whileallowing the employees toconcentrate on dealing witheach “unusual case.” So theteam theorized that program andprocess management trainingand skill were essential formanagers. (Synetics, FederalReserve Bank)

Information Access (addressesinsufficient data): To the degreethat up-to-date information waskey to the individual employee’sability to manage the customer’s

needs in the “here-and-now,” areliable informationinfrastructure was viewed ascritical by the study group. Theuse of a Notes-type databaseand the concept of a knowledgeaquifer that would be availableto all employees regardless ofthe point of customer contactwere suggested as ways toinvest resources for the greatestpayback. (Federal ReserveBank, Synetics, Digital)

Process Management andImprovement (addressesinsufficient staffing andinadequate knowledge ofprocesses): In the area ofservice processes, the grouphypothesized that a variety ofTQM methodologies could beapplied in many different waysto good effect. For example, byusing Concept Engineering aspart of a service process designeffort, a company could getcustomers to help define theservice and could involveinternal stakeholders who mightotherwise sabotage the process.An organization could use ISOcertification to enforce a processorientation and to begin processdefinition and documentation.Goldratt’s Theory of Constraintsand process modeling couldhelp companies anticipatestaffing needs and could offerways to handle the exceptionalas well as the steady state. Inaddition, it was suggested thatcompanies should study newstructures (e.g., roving teams orautomatically reallocatedresources) as a step towardcreating effective and efficientprocesses. Finally, the grouphypothesized that the ability ofservice processes to have real-time feedback loops and data

gathering made these processesa rich ground for improvement.(Synetics, DIGITAL, FederalReserve Bank)

Metrics and Relation toPerformance (addresses lackof accountability andresponsibility): Confronted bythe universal experience thatdeveloping metrics in a serviceenvironment can be verydifficult, the study groupsuggested that using ISOcertification as a disciplinecould speed up the developmentof standards. We consideredvoice of the customer as a toolfor testing the relevance ofmetrics that were selected. Wealso discussed the discipline ofHoshin management or policydeployment as a possible“solution” to serviceorganizations’ characteristicunwillingness to assign metrics.(all members)

Empowerment and Authorityto Act (addresses policy andregulatory constraints): Finally,given the “here-and-now”quality of many serviceoperations, the study grouphypothesized that topmanagement and CEOinitiatives were critical tomobilizing change efforts.Employee behavior change, andtraining of management toinspire the new behaviors,should help create the correctmindset for service. The groupsaw the chartering, building,and training of teams asessential ingredients in aservice environment. The goalwould be to engender inemployees the ability tofeel–and be–empowered, insuch a way that all employees


VOL. 6 NO. 2 FALL 1997 11

would take the authority andresponsibility for satisfying thecustomer at the same time thatthey would enhance their ownsense of satisfaction. K.Bemowski’s interesting articleabout the work of ClotaireRapaille on teams (seeBibliography) enlarges on thisidea. (Federal Reserve Bank,DIGITAL)

Enterprise Model andProcess Matrix

We adopted a model of anenterprise and developed amatrix for the analysis of serviceprocesses.

To test the preceding hypotheses,our enterprise model (or, for thatmatter, any business entity, nomatter how small) can be verysimply described as a closedloop system that starts and endswith customers. The enterpriseconsists of employees andmanagers who work on value-

adding processes for the sake ofthe customers. Customerfeedback and satisfactionmeasurements are constantlygathered, allowing a process ofcontinuous improvement. Thereis also a partnership withsuppliers. The glue thatmaintains the whole system isthe information stream or“knowledge aquifer.” Thedefinitions of these individualelements are listed below, andthe system as a whole is shownin Figure 4. (For simplificationpurposes, Figure 4 does not showthe environment, competitors,regulatory agencies, etc.)

Customer: Anyone, whetherinternal or external to theenterprise, who is impacted by aproduct, service, or process.

Process: An interrelatedsequence of value-adding actionsperformed to achieve an output.Process Management:Understanding, measuring,

controlling, and improving aprocess to achieve an outputdesired by the customer.

Supplier: One who suppliesnecessary people, materials, orinformation to add value to theprocess.

Information: The collectiveexperience and knowledge that isneeded to add value to theprocess.

Employees: Those employed bythe enterprise who provide addedvalue to the process.

Management: The collectivebody of those who manage anenterprise or a collection ofprocesses.

Metrics: Standards ofmeasurement.

In the context of this enterprisemodel, the study groupconsidered the typical business

FIGURE 4: Enterprise Model


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TABLE 3: Examples of Business Processes that Exist in Service SectorCompanies

TABLE 2: The Matrix


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processes that exist withinservice sector companies such ashotels, fast-food restaurants,insurance companies, andconsulting firms. We identifiedthree types of business processescommon to all servicecompanies:

l Operational processesl Moment-of-Truth processesl Innovative processes

Table 2 on page 12 relates thesethree processes to many differentelements and dimensions oforganizations. (Hereafter we willsimply refer to this table as “thematrix.”) This format wasinspired by and adapted from theexcellent work by A. T. Kearney(see Bibliography).

For some examples of what wemean, consider those shown inTable 3 on page 12.

Having agreed that the matrixcaptured most of the criticalelements of the businessprocesses, we decided to:

1. Verify whether or not thestudy group’s observations werein fact borne out in ourcompanies;

2. Validate the matrix as a toolfor diagnosing and prescribinghow to manage in a serviceenvironment; and

3. Generate additionalexamples of how membercompanies have actuallyimplemented solutions.

The next sections describe theresults of our efforts to verifyand validate the three keyprocesses and the matrix bygenerating case studies from ourown companies. At this stage inthe research, the study groupalso began to observe that,although we were lookingthrough the lens of serviceorganizations, the matrix seemedequally applicable for anyenterprise in any sector. We willexpand on this point in“Discussions and Dialogue.”

Operational Process

Table 4 below restates importantaspects of Operational processes.

Operational Process CaseStudy: The Federal ReserveBank of BostonThe mission of the FederalReserve system is to conductmonetary policy, to ensure thesafety and soundness of thebanking system, and to ensurethe integrity and promote theefficiency of the U.S. paymentssystem.

A TQM program has beenapplied to various businessprocesses at Boston’s FederalReserve Bank in support ofnew product development(e.g., electronic check products)and improvements to existingprocesses (e.g. Fedlinecustomer support). The 7-StepProblem Solving Method andtraditional quality control (QC)tools were used widely but metwith varying degrees ofsuccess. The “Check Error

TABLE 4: Important Aspects of Operational Processes


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Reduction” was selected as a test case for Operationalprocesses.

To set the context, the Fedperforms accounting functions todebit and credit the accounts ofpaying/receiving financialinstitutions. Checks arephysically sorted for delivery to

the paying institution. The Fedsorts dishonored checks(insufficient funds, stolen,fraudulent) sent in by payinginstitutions, returns such checksto the bank of first deposit, andmakes the necessary accountingadjustments.

The goal of the Check ErrorReduction project was to reducethe number of internal errors inthe check operation.

The problem-solving approachused by the Fed involvedteaming, the 7-Step Problem–Solving Method, process maps,LP diagrams, Pareto charts,

TABLE 5: Check Error Reduction Case Study Matrix


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cause-and-effect diagrams,checksheets, solution andimplementation matrices, and soforth.

Table 5 on page 14 helps todemonstrate the usefulness ofthe matrix we are proposing.

Summary

In summary, the Boston Fed’scheck sorting process conformedto the characteristics of theOperational process description.In terms of its processmanagement, it responded wellto the use of the 7-Steps, 7 QCtools approach to improvement.The outcome also confirmed thatbeneficial improvementsoccurred in the otherelements/dimensions that thematrix identified (e.g., customerand supplier relationships,information usage, employeeskill development).The key benefits of the project:Errors were reduced; other

improvement efforts werespawned; teamwork and staffinvolvement increased;employees were exposed to newskills; there was increasedfeedback and communication;recognition was given;internal/external projectpublications generatedinterest; and partnershipsdeveloped within the bank,within the industry, and withother Feds.

The key learnings:

l The 7-Step Problem SolvingMethod worked well here.

l Process mapping (withmodifications) is anextremely helpful tool.

l The team had lots of data butlacked an easy way to get to itand manipulate it.

l There was a prevalent assumption before this

project, that people with 20years’ experience at the Feddid not need training.

l Employees were surprised thatthey were capable of using thequality tools.

l Teams should have at leastone person capable of doinganalytical activities.

l Taking people off the line forextended projects, isextremely difficult;consequently, improvementefforts require quick TQMmethods.

Moment-of-Truth Process

Table 6 below summarizesimportant aspects of Moment-of-Truth processes.

TABLE 6: Important Aspects of Moment-of-Truth Processes


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Moment-of-Truth ProcessCase Study: DIGITAL

Digital Equipment Corporationis a world leader inimplementing and supportingnetworked platforms andapplications in multi-vendorenvironments. Building on itscore competencies in software,systems, networks, and services,DIGITAL, working with itsbusiness partners, provides acomplete range of information-processing solutions frompersonal computers to integratedworldwide networks. DIGITALdevelops, manufactures, andsells products and servicesworldwide.

The DIGITAL Call Center,serving the Americas, openedin November 1996. Customersand partners dial toll-freenumbers, such as 1-800-DIGITAL, and are linkeddirectly to Customer Careagents, or CCAs (voiceresponse units have beeneliminated) who addressquestions and manage calls to acomplete resolution. Handlingmore than 100,000 calls permonth, the Call Center is staffedby a diverse group ofknowledgeable professionalsspecializing in customer care,telemarketing, telesales, ordermanagement, and finallypresales technical support. In thepresales process, the subject ofthis case study, technical supportspecialists interact on thetelephone with customersseeking solutions in real time.

The call escalation process isworth describing here.

1. All calls are received by theCustomer Care agent, whostrives to understand thecaller’s issues and operatingenvironment and decides,based on processdocumentation, where toconnect the call. Meanwhileinformation about the call isentered in a database andforwarded along with the call;this eliminates the need forthe caller to repeat thequestions, a source ofcustomer irritation.

2. Appropriate calls are directedimmediately to the TechnicalSupport specialist who is mostknowledgeable in the specificproduct area. Thesespecialists, in turn, providecustomers and partners withconfiguration assistance andtechnical product solutions.

3. If the issue is complex, thecall can be routed toAdvanced Support specialists,also within the Call Center.There, consultation with theclient can be done off-line; ina three-way conversation; or,if DIGITAL staff need time toresearch questions, during acallback session. In fact,Advanced Support personnelmaintain a laboratory thatallows them to simulate thecaller’s environment so as toexperience the problematicsituation directly.

4. If Advanced Support cannotresolve the caller’s concerns,they have a direct link toDIGITAL engineering teams,who can provide real-timeengineering information andsupport.

Once the caller’s issues areresolved, the Advanced Supportperson is responsible for sharingthe gained knowledge with therest of the team. In fact, part ofthe compensation package isbased on knowledge sharing.Advanced Support personnelenter the knowledge they acquirein a Web page for their productcategory. This eliminatesredundant discovery andproblem solving. The wholeprocess is documented,practiced, measured, andconstantly improved based onweekly customer feedbackobtained by a third-partycustomer satisfaction survey.

The Call Center managementbelieves that employeesatisfaction is vital for highlevels of customer satisfaction inthe Moment-of-Truth process.Therefore, they have devotedparticular attention to trainingand rewards. Technical andAdvanced Support teams aretrained in:

l Call Center processes andtools.

l Generic technology gearedtoward the knowledge level ofthe individual.

l Product-specific know-howand certification.

l Interpersonal skills: “TotalQuality Relationships” and“Relationship Selling” arecourses focused onconversations with customerson the telephone. Supervisorsspend additional training timeon techniques for auditing liveconversations and providing


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positive feedback andcoaching. This extensivetraining gives Call Centerpersonnel the ability and thetools to delight theircustomers.

The compensation of the CallCenter personnel is also orientedtoward incentives for satisfyingthe customers. For example,part of the bonus of AdvancedSupport personnel is based on:

1. Team delivery of quarterlyknowledge transfer goals. Thequarterly team goal is 120knowledge transfer hours; forexample,

l one hour of credit is earnedfor each Technical Tippublished in the TechnicalSupport WWW homepage,

l one for each hour of on-linetechnical consulting viaWWW homepage TechTips,and

l eight for each four-hourseminar prepared anddelivered to TechnicalSupport, CCAs or telesales.

2. Individual average issueresolution time. The goal is toachieve an average escalatedissue resolution time of 16working hours.

3. Call Center Quality goal. Theattainment of a Call Centerquality metric of 88 percent incustomer satisfaction meets thisgoal.

Table 7 on pages 18-19illustrates the applied Moment-of-Truth process in the

DIGITAL Call Center case.The DIGITAL Call Center’shigh-performance team has hadexceptional success in itssolutions, which are customizedto the dimensions of theMoment-of-Truth. It is strikingthat in this case the “soft side” ofthe transaction is addressed withvery concrete solutions. Forexample, the company providesspecific training in telephoneskills and applies metrics toknowledge transfer whilemonitoring and maintaining veryspecific productivity metrics.Management receives training infostering morale and in coachingskills to relieve the stress of theenvironment. Finally, the teamgathers and acts upon customerinput weekly, obtaining constant(if not real-time) feedback. Thiscase serves as an excellentexample of how particularlyimportant it is to tailortraditional qualityimplementations to real-timeprocesses.

Innovative Process

The important aspects ofinnovative processes aredescribed in more detail in Table8 on page 20.

Innovative Process CaseStudy: Synetics

Synetics is a full-serviceworldwide systems integrator.The firm has earned a reputationfor technical excellence and forits commitment to continuousprocess improvement. Its corecapabilities include informationsystems planning andrequirements analysis, networkdesign and installation, systemacquisition, software application

development, help deskreengineering, training andmaintenance, and support.Characteristically, consultingservice providers see eachcustomer’s contract as uniqueand resist well-defined businessprocesses. Yet Syneticsrecognized that processmanagement, crucial to:

lManaging and meetingcustomer expectations;

lMaking the best use ofinformation systems;

lMobilizing the workforce;

l Establishing and managing tometrics.

Synetics’ efforts to apply the 7-Step Problem Solving Method totheir business processes hadproved difficult. However, theproactive TQM problem-solving tools, ConceptEngineering (CE) and QualityFunction Deployment (QFD),turned out to be extremelyuseful. These tools facilitatedcustomer buy-in and satisfactionand helped promote a mutualunderstanding of customers’needs and solution technologyup front. Synetics integrated theTQM tools into severalprograms:

l Rapid Action Development.RAD is a high-speed process-oriented softwaredevelopment methodologyinvolving a small team ofusers and developers.

l Joint requirements planningand joint application design.JRP and JAD make use offrequent customer reviews.


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TABLE 7: Applied Moment-of-Truth Process for DIGITAL's Call Center


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TABLE 7 (cont.)

l Notes databases and standardproject notebooks.Development teams shareinformation on projects andservices through such tools.Parenthetically, the “ProjectNotebook” is a Syneticssuccess story that emergedfrom an employeesuggestion program; anaward-winning 7-Step qualityaction team developed theNotebook. The Notebook wasadopted widely throughout thecompany and is now alsooffered as an application forcustomers.

Synetics used ConceptEngineering to develop aninformation system for adistributed help desk application.

The customer–the IRS–hadconflicting ideas about whattheir distributed help desk shouldbe; Synetics, for its part,believed that a preconceivedsolution would not meetcustomers’ demands. CE offereda concrete and productivemethodology for developing anew solution that would meetcustomer demands. Because oftime constraints, the team

experimented with shortcuts tothe CE process. For example:

l The JRP was used to collectthe voice of the customer (CEstep 2).

l The Synetics team performedthe requirements LP but notthe image LP (step 3).

l The team did the importancequestionnaire but not the Kanoquestionnaire (step 7).

l The team used QFD tocorrelate requirements with


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TABLE 8: Important Aspects of Innovative Processes

TABLE 9: Synetics' Innovative Process


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functions but not with metrics(step 7). (For a description ofthe CE steps referred toabove, refer to the CQMManual ConceptEngineering.)

This is an excellent illustrationof learning, using, and adaptingTQM techniques in aninnovative process environment.The modified CE processworked very well for Syneticsdespite time and customerconstraints.

To test the innovative processmatrix, Synetics recorded theirexperience. (See Table 9 on page20.)

Summary

In the Innovative process casestudy, the need for a projectmanagement orientation andproject metrics is clear.However, the emphasis is ontools like Concept Engineeringto create mutualunderstanding; and the focuson managing for creativity

distinguishes Innovativeprocesses from the other twotypes of processes.

One Company–ThreeProcesses: The MARKEMApplication

The CQM Service Study Grouppresented its findings to theCQM Chief Quality OfficersRoundtable on June 14, 1995, ameeting graciously hosted byEnergy Systems Industries inBoston, Massachusetts. Theteam asked the roundtablemembers to apply and test themodel in their businessenvironment. Participants fromMARKEM, Titleist and Bosehave validated the usefulness ofthe model. We will include herethe feedback from MARKEM,authored by Richard P.Bangham, Division Manager,Customer Service.

MARKEM Corporation is aglobal enterprise that providesin-plant printing systems forproduct identification and

decoration application. Thecorporation is headquartered inKeene, New Hampshire, withmore than 1,600 employeesworldwide and annual sales inexcess of $200 million. Thebusiness encompasses the designand manufacture of printingsystems; sale of supplies (e.g.,ink for printing); andsales/service, with particularattention to the elimination ofequipment downtime.

MARKEM Corporation hasconcentrated activities in thedevelopment of printing systemsthat employ a wide range oftechnologies. Current effortsinclude the application ofdigital-to-print technology. Newgenerations of products will setstandards for productperformance in terms of imagequality, resolution, speed, andreliability.

MARKEM evaluated itsprocesses and theircharacteristics using the matrixfor the three types of processes.

TABLE 10: MARKEM's Consolidation, Packing, and Shipping Process for BulkShipments


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TABLE 11: MARKEM's Tech Service Hot-Line

TABLE 12: MARKEM's Model 6000 Rotary Gravure System

Operational Process: BulkShipments to MARKEMBusiness Centers

MARKEM serves its non-U.S.customers primarily throughbusiness centers located in keyareas of the world. EachMARKEM business centerreceives in weekly bulk

shipments goods to serve itscustomers from Keene. Theconsolidating, packing, andshipping of these bulk shipmentsis an operational process. (SeeTable 10 on page 21)

Moment-of-Truth Process:The Tech Service Hot-Line

MARKEM offers a tech servicehot line (an 800 number) forcustomers to use when they havetechnical questions and problemswith regard to the operation oftheir MARKEM printing system.(See Table 11 above)


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Innovative Process: Model6000 Rotary Gravure SystemDevelopment

MARKEM continues to developnew products integrating newtechnology. One example is theModel 6000 rotary gravuresystem. (See Table 12 on p. 22)

MARKEM has embarked on aConcept Engineering project todevelop a pad printing offeringthat is much easier to set up andoperate effectively in anindustrial manufacturingenvironment.

Summary

Richard Bangham wrote, “Ifound this exercise extremelyuseful. A light bulb went on forme when I discovered the factthat we are very light on usingmetrics in evaluating our [techservice hot-line] performance,the fact that we have notempowered people in our BulkShipping Department toproblem-solve as a means ofimproving accuracy, and the factthat ISO9001 practices are veryuseful in Innovative processes.”

Discussion andDialogue

We started this paper byproposing a model thatnecessitates the tailoring andoptimization of modern TQMapproaches to variousbusinesses--a model that avoidsthe reliance on a one-size-fits-allformula for quality programs. Inparticular, CQM members fromthe service sector found thatthey had difficulty when theytried to apply the manufacturing

Dave Walden on Moment-of-Truth Service Processes

Having attended several ServiceStudy Group sessions, Dave Walden,CQM’s director of R&D, submitteda note on “Statistical ProcessControl in Moment-of-Truth ServiceProcesses.” The following is anadapted excerpt; the entire note isavailable from the CQM library.

Moment-of-Truth processes arethose processes where serviceworkers must deal with customersin real time, such as airline ticketclerks or customer support hotlinepersonnel. [Clotaire Rapaille hasdescribed his research showing thatcustomers’ loyalty is demonstrablyhigher when they have received anexcellent response to a problem thanwhen the customers have notencountered any problem at all.]People personally involved inMoment-of-Truth processes oftenfeel that their processes are differentfrom Operational processes such asone often finds on a manufacturingline. And indeed, some statisticalprocess control (SPC) techniquesthat are typically applied to controlor improve Operational processesmay seem more difficult to apply toMoment-of-Truth processes.

Yet the use of SPC for Moment-of-Truth processes is an importantearly step people should consider asthey seek customer satisfaction.Using SPC may be the only validway to tell whether a Moment-of-Truth process is working correctlyand what factors contribute to thatsuccess. Furthermore, use usingSPC may be the only valid way totell whether improvement efforts aremaking things better, wastingefforts, or actually making thingsworse. For instance, some factorsthat may be important to controlMoment-of-Truth processes includeemployee satisfaction, [becauseemployee satisfaction and customersatisfaction are correlated];information systems [to provide thedata employees need in dealing with

customers]; company policies,practices, and economics;empowerment of employees tomake real-time decisions to dealwith customer situations;employees’ expertise with regard tocompany policies, practices andeconomics; employees’interpersonal skills; and so on.

Once one has decided which factorsto investigate, there are many waysto establish cause and effect. First,one might simply change one factorin a controlled way (e.g., giveadditional role-playing in listeningskills) and see if the results metricschange. Second, one might try todevelop quantitative metrics (e.g.,objective or subjective “listeningskill ratings” for employees) andthen use statistical methods to findcorrelations with results metrics.Third, one might try to findcorrelation between the resultsmetrics for different employees andthe employees’ specificcharacteristics – for example, theirprofiles, their Myers-Briggsprofiles, their years of experience inMoment-of-Truth processes, and soon. In any case, SPC may benecessary to validate apparentchanges in performance.

However one evaluates andmeasures Moment-of-Truthprocesses, practiceis critical. Thepeople best prepared to deal withunexpected Moment-of-Truthsituations are those who haveworked hard in advance to practicehandling these situations before theyoccur in real life– people such asairplane pilots, top-rank tacticianson racing sailboats, successfulsalespeople, and surgeons. Forfront-line personnel the chances ofsuccessfully navigating a Moment-of-Truth are a lot better if peoplecan apply what they know from aknown, commonly successfulpattern of responses, as in theDIGITAL case study.


24 FALL 1997 VOL. 6 NO. 2

companies’ strategy ofdeploying 7-Step ProblemSolving throughout thecompany. The CQM ServiceStudy Group undertook tounderstand the uniqueenvironment of service firmsand, to adapt TQM practices tofit this environment.

But the team’s true discovery(the Aha!) was that a uniquequality approach is not neededfor the service sector. Instead,we realized that there is a naturalemphasis or bias inmanufacturing enterprises that isdifferent from the emphasis inthe service enterprises. In amanufacturing environment,Operational processmanagement and improvementtechniques are crucial, while anexternal customer focus mayoften take a back seat. Thereverse is true in servicecompanies, where it is difficultto recognize the added value tothe customer of improvingOperational processes as againstthe urgency of serving thecustomer in real-time throughMoment-of-Truth and Innovativeprocesses.

In fact, the study group came tounderstand that all organizationsdeal with each of the three typesof processes in the course ofdoing business; and the uniquecharacteristics of these processesin different organizationsdemand different strategies andmethods to enhance and improvethem. So, while the 7-StepProblem Solving Method may bean effective emphasis in amanufacturing enterprise,service companies may chooseto limit their deployment of 7-Step Problem Solving to

identifiable Operationalprocesses. The focus in serviceenterprises, at least at first, maybe on Concept Engineering,project management, andcommunication skill building intheir Moment-of-Truth andInnovative processes. Thechallenge for every organizationis to recognize and differentiatebetween the different processes,diagnose the strengths andweaknesses in the differentelements/dimensions, and deploythe correct improvementmethodology.

The matrix developed in thecourse of this research has beentested and has proved useful as away to diagnose and shapequality programs based on thetarget audience (the businessprocess and its workers). Thematrix becomes the tool throughwhich a company can decidehow to tailor TQMmethodologies for specific typesof processes. The matrixpresents how processmanagement, customer andsupplier relationships,information resources, skills, andmeasurements will varydepending upon the nature of theprocess. It allows us toacknowledge and recognize thatmethods that may be appropriatefor manufacturing may not, forexample, work well forteleselling.

For example, let us considertraining. As a firm decides howto prioritize training dollars andresource time, should it give thesame training to those involvedin Operational processes as itgives to those involved inInnovative or Moment-of-Truthprocesses? This paper suggests

not. In fact, one of the causes ofthe angst that existed among thestudy group members was thatwe had all been trying toimplement the same tenets ofTQM everywhere from thefactory floor to the sales office.The study reported here,however, suggests specializationis valuable and offers a verifiedtool (the matrix) to facilitatecustomization of employeetraining. For the Operationalprocess folks, firms want toemphasize statistical techniquesand teamwork. The primaryfocus for the Moment-of-Truthfolks is interpersonal skills andempathy. The Innovative folkswould certainly benefit fromskill in project/programmethodology and ConceptEngineering.

Using a customized approach, afirm can tailor its quality trainingprogram and implementationstrategy to be more cost effectiveand to have greater appeal andrelevance to the targetpopulation. Once the TQMprogram is tuned to the humanculture and is in harmony withthe firm’s strategic and businessmanagement objectives, it willprovide real differentiation in themarketplace.

Next Steps

We would like to test theuniversality and usefulness ofthe matrix and its approaches.We encourage our readers toapply the matrix to their businessenvironment. We would deeplyappreciate feedback on thefollowing:

l Is the matrix a usefuldiagnostic tool?


VOL. 6 NO. 2 FALL 1997 25

l Do the Elements/Dimensions of your processesmap to the ones in the matrix?

l How appropriate are theManifestations as described inthis paper, and how shouldthey be modified?

l Above all, what solutions orinterventions that you haveapplied (with either good orbad outcomes) to thevarious elements of the threetypes of processes couldbe shared with otherenterprises?

If we can generate a richdatabase of documented appliedsolutions, the study groupbelieves that we will have avaluable tool for companies touse as they develop their owncustomized TQM initiatives.

Feedback Matrix

Comments, suggestions, andideas for improvements are mostwelcome. Table 13 is a prototypematrix for your use. Pleaseaddress your thoughts andresults to: Center for Quality ofManagement, CQM ServiceStudy Group, One AlewifeCenter, Cambridge, MA 02140.Phone: (617) 873-8950. Fax:(617) 873-8980. E-mail:[email protected].

Reflections

There was great value in theprocess of research used by theCQM Service Study Group. Thetopic was one that was of sharedconcern, and its solution offeredreal value to the participating

organizations. Companiesdemonstrated great cooperationand willingness to be thelaboratory: to put theory intopractice so as to refine and thentest the value of the findings.The group members gatheredsupport from one another, andour learning was facilitated byour having others with whom tostudy. In the end, however, theentire CQM communitybenefited–because the learningsand the use of the matrix havenow been incorporated intoCQM’s 6-Day Course (TQMPlanning and Implementation forSenior Managers) and into othercourses that are used to diffuseunderstanding across CQM’smutual learning community.

TABLE 13: Feedback Matrix


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Bibliography

American Quality Foundation. The Stuff Americans Are Made of: An American Strategy for QualityImprovement. American Quality Foundation Brochure, 1993.American Quality Foundation, The Stuff American Are Made of: The Personal Quality ImprovementProcess of the American Quality Foundation. Research report, 1994.Anthony, R. "Note on Service Mapping." Harvard Business School, N9-693-065, 11/30/92.Aramati, V. S. Customer Value Chain Quality--the Human Aspect. DIGITAL presentation to R. Palmer,Maynard, Mass., 5/16/94.Aramati, V. S., & Woll, T. TQM in Service Team. CQM presentation at the CQO Roundtable, 6/14/95.Aramati, V. S. et al. “Customer Value Chain Quality Plan: Quality in the Customer Value Chain,”DIGITAL internal memo, 5/25/94.Bailey, Dandrade. "Customer Loyalty." Center for Quality of Management Journal, Vol.4, No.3. Fall 1995.Bemowski, K. “What Makes American Teams Tick?” Quality Progress, January 1995.Berry, L. L., et al. “A Conceptual Model of Service Quality & Its Implication for Future Research.”Journal of Marketing, Volume 49, Autumn.Carlzon J. Moment-of-Truth.Harper and Row, 1987.Center for Quality of Management Journal, Vol. 4, No. 4, Winter 1995 (special issue on Managing the"Soft Side").Center for Quality of Management Journal, Vol. 5, No. 1, Spring 1996 (issue on Design and Planning inOrganizations).Davidson, W. H., & Davis, S. M. “Management and Organization Principles for the InformationEconomy.” Human Resource Management, Vol. 29, No. 4, Winter 1990.Eastman Chemical Company (ed.). Quality Management Process (QMP). Eastman Chemical Co.application summary, Kingsport 1994.Fagan, J. TQM in Services (Customization of TQM) Innovative Processes. CQM presentation at the CQORoundtable, 6/14/95.Flores, F. “Management and Communication in the Office of the Future.” Report printed by Hermenet Inc.,San Francisco, 1982.Fujita, S. “Employee Satisfaction - The Source of Customer Satisfaction”, Union of Japanese Scientists andEngineers, Societas Qualitatis, Vol. 8 No.1 March/April 1994Goldratt, E. Theory of Constraints. North River Press, Inc., Croton-on-Hudson, NY, 1990.Hart, C. W. L. “The Power of Unconditional Service Guarantees.” Harvard Business Review, No. 88405,July-August 1988.Hart, C. W. L. et al. “The Profitable Art of Service Recovery.” Harvard Business Review, No. 90407, July-August 1990.Heskett, J. L. “Managing in the Service Economy.” Boston, Mass., 1986, p. 127.Kalus, S. Check Error Reduction Project. CQM presentation at the CQO Roundtable, 6/14/95.Kearney , A. T. “Total Quality Management: A Business Process Perspective.” Management Report, No.35, 1992.Lader, J. I. “Getting Emotional about Quality." Quality Progress, July 1988.Lee, T., & Woll, T. "Reflections on the Idealized Design Planning Process." Center for Quality ofManagement Journal, Vol. 5, No. 1, Spring, 1996.McManus, J. “ Creating a Model of Quality That Works.” DIGITAL Quality Newsletter, July-August 1994.Pelletier, B. P., & Rahim, M. A. “TQM and Drawbacks of Incentive Systems: Facts or Fallacy?” IndustrialManagement, Vol. 35, January/February 1993.Powell, T. “When Lemmings Learn to Sail: Turning TQM to Competitive Advantage.” Handbook ofBusiness Strategy, B. Voss & D. Wiley, eds. Faulkner & Gray, pp. 42-54.Powell, T. C. “Total Quality Management As Competitive Advantage: A Review and Empirical Study.”Strategic Management Journal, Vol. 16, 1995, pp. 15-37.


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Sasser, W. E. et al. “Mobilizing People.” The Service Management Course: Cases and Readings. NewYork, Toronto, et al.: 1991.Schlesinger, L.A. & Heskett, J. L. "Breaking the Cycle of Failure in Services." Sloan Management Review(reprint series), Vol. 32, No. 3, Spring 1991.Schlesinger, L.A. & Heskett, J. L. "Enfranchisement of Service Workers." California Management Review(reprint series), Vol. 33, No. 4, Summer 1991.Schlesinger, L.A. & Heskett, J. L. “The Service-Driven Service Company.” Harvard Business Review,September-October 1991.Shiba, S., et al. A New American TQM. Cambridge, Mass.,/Productivity Press, 1993.Soin, S. S. Total Quality Control Essentials. New York, St. Louis et al.: 1992.Walden, D. “Statistical Process Control in Moment-of-Truth Service Processes.” CQM note, 9/1/95.Wharton School. “Quality: Moving toward a New Paradigm.” The Wharton School of the University ofPennsylvania, Wharton Impact, Spring 1994, pp.2-3.Woll, T. "Idealized Design and TQM: Planning by Practitioners." Center for Quality of ManagementJournal, Vol. 5, No. 1, Spring 1996.Zuckerman, M. & Hatala, L. J. Incredibly American. ASQC Quality Press, Milwaukee, WI, 1992.


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Born in Placerville,California and raised inNevada, Richard LeVittreceived his BSEE degreefrom the University ofCalifornia at Berkeley. Heworked for severalcompanies as anengineering managerdeveloping dataacquisition systems forprocess industries prior tojoining Hewlett-Packardin 1981. At HP, he hasheld a number of posts inresearch and developmentbefore becoming theRoseville NetworksDivision QualityDepartment Manager. Hethen became the qualitymanager for HP’sAnalytical ProductsGroup, a position he heldbefore becoming thedirector of CorporateQuality for Hewlett-Packard Companyworldwide, the post henow holds. As director, heled an initiative to“reinvent quality” tomake the company’sproducts and processesmore customer-centered.

QUALITY 1 ON 1:BECOMING CUSTOMER-CENTERED

Richard M. LeVittDirector, Hewlett-Packard QualityHEWLETT-PACKARD COMPANY

ABSTRACT

A team at Hewlett-Packard has been working to “re-invent” quality onthe basis of benchmarking and related research. This paper chronicleshow Hewlett-Packard came to realize that a newapproach to quality is needed to move beyond today’s practice of TQM.This new way has a place for intuition as well as data and analysis. Itfocuses on understanding each customer’s unique experience with thecompany. By acting across organizations in the value chain, it strivesfor “win-win” solutions for both customers and the company.

Introduction

Hewlett-Packard has a long and successful record in quality, marked byHP Japan’s winning the Deming Prize in 1982, and more recently byreceiving top scores in a number of industry surveys. Yet we are veryaware that we could provide better service for our customers. And wehave recently discovered how to do so. The story of this discovery andthe changes we have undertaken is the subject of this article.

Why Change?

HP’s current reputation is an enviable asset. The company name hasbecome a potent symbol of quality, integrity, and innovation. Butsince competitors are relentlessly improving everyday, complacency isdangerous. Challenges in HP’s current business environment signal aneed for change.

These challenges include:

l rapidly rising customer expectationsl emerging high growth marketsl increasing dependence on suppliers, partners, and third party

channelsl relentlessly accelerating speed in all businesses


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Rising CustomerExpectations.

Increasing global competitionand rapid technological changeare transforming virtuallyevery aspect of business, andraising the standard forexcellence.

Customers want HP to beresponsive, but some perceiveus as inflexible, and unwillingto take personal ownership forresolving their problems.Customers also seek greaterflexibility on a business-to-business basis. Increasingly,business relationships are builton customized, value-addedservices, including consulting,solution development, and on-site operations support.

Emerging Markets.

HP is moving into marketsthat, for us, are largelyunexplored territories. Thehigh-growth economies in Asiaand elsewhere strain ourcapacity to localize products,deliver them, and support themat low cost. In the US andEurope, sales into the homemarket means satisfyingcustomers whose expectationsfor dependability and ease ofuse have been set by televisionsets and microwave ovens.This sets a new performancestandard, because problems inthe consumer market tend tohave high visibility to usersand to the press.

Increasing Dependence onSuppliers, Partners, andThird-Party Channels.

Large elements of product de-sign, manufacturing, support,and sales are being contracted

out to others. Since many ofthese contract companies alsodo business with ourcompetitors, maintaining HP’sdistinctive quality leadershiphas been problematic. In thepast few years, our mostsignificant quality issues havebeen traced to some aspect of asupplier relationship.

Channels have a markedeffect on a quality image.

In the days when most saleswere made through HP’s ownsales force, the integrity andprofessionalism of our fieldpersonnel played a primaryrole in shaping customerperceptions. HP’s dedicatedsales and support people stillmaintain strong customerrelationships and build mutualloyalties. But mass marketingis changing the picture. Today,many customers may first hearabout HP from a poorly-trainedsales clerk at a retail outlet,rather than from an HPemployee.

Accelerating Speed.

Customers want problemsresolved more quickly, byphone, fax, modem, or animmediate on-site visit. Entireproduct life cycles, includingdesign, ramp-up, maturity,and obsolescence now occur inthe time it once took for designalone. Shrinking productdevelopment times requirefaster decisions, which allowsless time for testing andevaluation before release. Atraditional quality emphasis ontesting, data analysis, andincremental improvementalone will not be able to keeppace.

Re-inventing Quality

In response to these pressures,our company decided to makea major change in how wemanage quality and customersatisfaction. This changeentails a fundamentallydifferent way of looking at ourcustomer relationships and ouroperations.

At the beginning, in 1993, wesensed that we wanted abreakthrough, a major shift inthinking, not just anincremental improvement. Weset out to “re-invent” qualitywith a team of people drawnfrom field and factoryorganizations around theworld. We also had theguidance of an advisory boardof General Managers and thesponsorship of HP’s Planningand Quality Committee, whichis the group of seniorexecutives who have overallresponsibility for thecompany’s quality processes.

At the start, our focus was thecontribution of the Qualitydepartments within HP. Thispresenting problem grew out ofconcerns that the qualityprofessionals were out-of-date,pushing traditional tools andmethods, rather thanaddressing the quality issues ofthe contemporary businessenvironment. It soon becameclear that the task extendedbeyond the work of the Qualitydepartments. In order to createa real change in the qualityfunction, we needed to createchange in the largerorganization as well. Thisrealization led to a deep re-evaluation of a number of ourlong-held beliefs about qualityand quality management.


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Initially we did an internal stateassessment, to diagnose thecapabilities of the qualityfunction in HP, and tobenchmark the quality methodsof our best business units. Inparallel, we did a world-scan,to integrate the perspectives ofHP customers and third-partyindustry analysts. We alsobenchmarked leadingcompanies in Europe, the US,and Asia, to determine whatnew approaches world-classcompanies are using in the1990s.

The results of thebenchmarking were surprisingto us. HP, along with manyother companies, hadbenchmarked quality leaders inthe early 1980s. More than adecade later, we found that verylittle had changed: the basictools, methods, and ideas ofTQM that we saw were longfamiliar. In contrast with therapid pace of technologydevelopment in elsewhere inbusiness, the technology ofquality in these leadingcompanies seemed almostfrozen.

We noted something else thatwas striking. Though allquality programs talk aboutcustomer satisfaction, very fewseem to actually do much aboutit. Most are focused internally,on the tools, processes, andrequirements that we havecome to call “producer-centered.” They are well-intentioned, to be sure. But it israre to find a program that istruly driven by theactual experiences andpreferences of customers —one that is “customer-centered.”

In 1994, with benchmarkresults in hand, we did a gapanalysis. This analysis led toseries of recommendations forredefining quality in morecustomer-centered terms, andfor creating a change in ourapproach to managing qualitysystems. The package ofreforms was launched at amajor internal conference inNovember, 1995.

It is a true paradigm shift thatwe call Quality 1 on 1:Becoming Customer Centered.

A Paradigm Shift

To explain why we see it as aparadigm shift, I’d like to beginwith an example from anotherfield, the making andappreciation of fine wines.

The quality of a wine resultsfrom skill in growing vines,crushing grapes, andfermenting their juices. As aproducer, a vintner is occupiedwith the daily activities of thewinery, and the sciences ofagriculture and enology.

For a consumer, the quality of awine is a sensory experience.Wine enthusiasts have ritualsfor tasting, and special termsfor describing color, aroma,and flavor. These termsdeveloped becauseappreciation of a wine is notpart of the wine itself: it isentirely one’s own reaction tothe wine’s character.

Of course, the sensoryevaluation of wine has anancient tradition. Successfulwine makers must be expert inthis tradition if they are toevaluate their wines as theircustomers do. So the bestvintners understand both the

process of creating fine wineand the nuances ofexperiencing wine.

A similar example can bedrawn from the entertainmentindustry. Producing a movieentails the coordination ofmany skilled trades with onegoal in mind: to create astimulating product that drawslarge crowds. But the quality ofa motion picture isn’t simply inthe recorded images andsounds. For the theater goer,the quality of a film lies in theirpersonal response to thoseimages and sounds. It lies intheir own, individualexperiences and the uniquetastes and preferences theyhave developed over time.

For consumers of wines andmovies, the experience is theprimary thing. At HP, we havecome to realize that the same istrue for users of high-technology products. Theseproducts do have objectivequality characteristics: thosemeasurable parameters ofreliability, performance, andease of use that are achievedwith good design andmanufacturing process controls.But quality isn’t complete untilit makes an impression onsomeone. At the end of the day,it is an individual customer’simpression of his or her wholeexperience with a product —-or a service, or a company —-that matters.

So quality isn’t just somethingproducers do for customers. Itis a result of the producer’sgeneration of a product orservice and a specificcustomer’s experience of thatproduct or service.


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In a sense, quality is co-createdin the relationship of producerand customer throughout the lifecycle of their interactions. Toimprove, we need more insightinto the customer’s point ofview.

Points of View

In the following sections, aproducer’s view of quality iscompared with a customer’sview. This comparison reveals ahuge contrast, illustrating someof the differences between theproducer’s world and thecustomer’s world. Theproducer’s world tends to beobjective and rational, filledwith the machinery of businesslife. The customer’s worldvaries with the role of thecustomer, but it often contains awealth of subjective impressionsand emotions which powerfullyinfluence decisions.

A Producer’s View

This section sketches the majorideas that have come torepresent quality as a goal andquality as a strategy in industry.The ideas coexist at HP todayand each has importantapplications around the world.

Quality as a ProducerGoal

Conformance to requirements isan important goal for qualityassurance, dating back to theinvention of interchangeablemachined parts in the 1800s.While it remains important,conformance to requirements isincomplete. A vintner mustattend to technical matters, suchas bottle dimensions and theacidity of a wine. But attentiononly to these things and not tothe full sensory experience of

wine consumers would befoolhardy.

Another producer goal is fitnessfor use. This term wasintroduced by Joseph Juran inthe 1950s to emphasize that aproduct or service should, aboveall, serve the purposes of theuser. In his landmark QualityControl Handbook, Juran took autilitarian position on fitness,believing that its subjectiveaspects are not under aproducer’s control.

Meeting customer expectationsis a quality goal identified in the1980s. It brings quality a stepcloser to the psychologicalrealm of customer perceptionsand preferences. Meetingcustomer expectations dependson understanding the subjectiveimpressions created byadvertising, brand images,product claims, and priorexperiences of the customer.

Another quality goal isproviding superior value. Theobjective is to identify apopulation of customers whohave common needs and todevelop a compelling (andprofitable) value propositionthat answers those needs. Winemarketers classify consumers as“gulpers, label drinkers, thosewith an appreciation of well-structured, simple white and redwines, and connoisseurs of thecomplexities of great wines asworks of art.” Each of theseconsumer segments requires adistinct value proposition.

Quality as a ProducerStrategy

A search for effective qualitystrategies has resulted in anotherprogression in thinking over theyears.

Tests and inspections are theclassic tools of qualityassurance. These defectdetection methods remain im-portant for software andhardware development, andoutgoing product verification inmanufacturing.

Process improvement presents amore powerful strategy. TotalQuality Control (TQC) is HP’smost commonly used processimprovement method. TQCpromotes a culture ofcontinuous improvement inwhich managers and workers,not inspectors, take ownershipfor quality. Once mastered, TQCyields benefits that accumulateover time like compoundinterest.

Total Quality Management(TQM) evolved from TQC toattack the large-scale issuesthat affect entire organizations.TQM integrates managementroles, such as leadership,planning, and empowerment,with the disciplines of customerfocus and process thinking.Often attributed to W. EdwardsDeming (who deniedauthorship), TQM is apioneering attempt to think oforganizations as systems.

Over the years, TQM hasbecome the primary qualitystrategy in leading companiesaround the world. Its prin-ciples have been incorporatedin such prizes as theMalcolm Baldrige National


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Quality Award and theEuropean Quality Award. TheHP President’s Quality Awardrelies on the Quality MaturitySystem (QMS), which definesHP’s current version of TQM.Many HP entities run theirbusiness with the philosophyand practice of TQM.

TQM has its critics who pointto a lack of direct evidence thatit produces business results.External studies of Baldrigewinners and other leadingpractitioners do show somerelationship between TQM andbusiness performance. WithinHP, the benefits of TQM havenot been convincing to allbusiness managers.

Because the linkage betweenTQM and businessperformance is hard todemonstrate, some managersprefer more results-orientedimprovement technologies,such as supply chainmanagement and re-engineering. Yet these too areproducer-centered strategies.When used alone, they areincomplete.

A Customer’s View

Customers have impressions ofquality. Their impressions andgoals influence their choices.As something is chosen, eachcustomer begins a sequence ofexperiences over a span oftime.These experiences lead toemotional states, such assatisfaction, delight, anger, ordismay, that influence futurechoices. Attention to theirimpressions, goals,experiences, and emotionalstates can help producers create

mutually beneficialrelationships with theircustomers. These relationshipsare the foundation of Quality 1on 1.

Impressions of Quality

The unique history of eachcustomer influences his or herpersonal impressions of quality.Not all of these impressionscan be verbalized, yet theyaffect customer behavior andthe business success ofproducers. Emotionalresponses to products orsituations occur in a nonverbal,mental world. Our consciousminds are allowed onlyglimpses into that world.

Sometimes we feel a vaguedisquiet, an uneasy feelingabout something that we can’tquite put our finger on. Atother times, something feelsinexpressibly right to us, butwe cannot explain why.Instead, we say, “I like it!”

When emotions have labels, wethink we understand them.When we ask customers howthey feel about our service, weassume they can tell us. Whenwe ask customers to score uson satisfaction surveys, weassume that the numbersmeasure the complexity oftheir experience.

We are beginning to understandthat customer satisfactionmeasures only the surface ofthe customer experience. Nocustomer chooses products incomplete isolation. In bothemerging and mature markets,value comes from somecombination of goods andservices that serves acustomer’s purpose. Geoffrey

Moore, author of Crossing theChasm, has identified thiscombination as the “wholeproduct.”

Producers commonly say thatcustomers judge quality, as ifproducts were guilty orinnocent. But customers don’tsimply judge quality —- theychoose things to buy.Impressions matter toproducers because theyinfluence the future choices ofeach customer. Quality, fromthe customer’s point of view, isan impression of a whole-product experience.

Quality Ambiguity

Customers want to get the mostvalue they can in anytransaction. Lack of knowledgeabout the benefits of thealternatives they facecomplicates the decision.“Quality ambiguity” is a termfor the uncertainty a customermay feel about the quality of aparticular product or serviceoffering. Quality is not alwayseasy to evaluate, particularly ifthe customer has little priorexperience with products in thecategory or with their variousapplications.

Suppose, for the moment, youhave gone to the market to buywine to drink at dinner withsome friends. Arrayed on theshelves before you are rows ofbottles from wineries you donot recognize. Qualityambiguity is high at this point:you do not recall tasting any ofthese varieties. Time is short,so all you have to aid in yourdecision are substitute cues forquality.


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You might look at price,under the assumption thathigher-priced varieties arelikely to taste better. Youmight seek hints in the labeldesign or check for dust as asign of an unpopular brand.

Once you’ve made yourselection and brought it home,the moment arrives forpulling the cork and samplingyour prize. When you take thefirst sip, quality ambiguity issuddenly reduced. You knowright away whether you like itor not — first impressionscount.

Vendors generally strive toreduce quality ambiguity,especially if they have asuperior product. However,quality ambiguity can be anadvantage to a recognizedsupplier. It’s been shown thatwhen ambiguity is high,customers have lessconfidence in their opinions.Not knowing what to expectcan lead customers to be moretolerant when problems arise.

Higher quality ambiguity isalso associated with higherbrand loyalty. In situationswhere quality is difficult tojudge, customers tend to pickbrands they know or go withthe recommendation of afriend.

Quality as a CustomerGoal

Customers seek the maximumperceived benefit they can getat the lowest available cost.Benefits can be anything —functional, experiential, orpsychological — that answersa need and rewards thecustomer for his or her

choice. Costs can includeout-of-pocket expenses, aswell as costs in time, effort,and other tradeoffs that arerequired to obtain a benefit.Perceptions about benefitsand costs are very personaland individual. They changein a fluid and dynamic way,emerging moment by momentfrom conscious andsubconscious needs.

In his book Motivation andPersonality, AbrahamMaslow presented a multi-layer model showing therelative priorities of personalneeds. In his model, basicneeds, such as food andsecurity take priority — whenthey are unsatisfied — overother needs, such as socialacceptance and prestige.Though the model is toosimple to actually explainwhy people do what they do,it is useful for introducing adiscussion of customer needsand perceptions of value.Four factors seem relevant tothe buyer-seller relationship:

l the customer’s feelingsabout risk

l the customer’s purpose atthe moment

l the customer’s currentsocial or business role

l the customer’s self image

Feelings about risk.

Next to biological needs,security and peace of mindrank highest in importance.Products should not causebodily harm or injury. HP’sfocus on preventing productfires and electrical hazardsacknowledges this importantpriority.

A subtle but important risk isthe possibility that a productselection will harm theinterests or reputation of thechooser. If someone who isknown as a great authority onwines makes a selection forfriends at dinner, he or shemay suffer embarrassment ifthe choice turns out to beinferior. Customers varygreatly in their tolerance forthis kind of risk.

Purpose.

Purpose defines the desiredsolution and provides thecontext for evaluating fitness.This is the customer’s view offitness for use: fitness for myuse in my situation. Whenseen this way, fitness for useis not a producer-definedproperty of a product orservice: it is a subjectivebelief a user has, a belief thatreflects his or her intent.

Role.

Purpose is governed in part bythe social or business role aperson takes. The needs andpreferences of customerschange, depending onwhether they are acting asparents, hobbyists, homeowners, or members of abusiness team. Needs foracceptance or recognition canexert a strong influence onpeople in any role. Winedrinking is usually a socialactivity, accompanied by foodand conversation. A personmight suppress his or herpersonal wine preferences togo along with the group or,conversely, may demonstrateexpertise by ordering aspecial variety.


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In a business setting, the role acustomer takes will shape his orher preferences. Members of abusiness team will collectivelyassess business needs, technicalconstraints, and cost goal;however they experience thesefactors differently depending ontheir organizational role.

Self image.

People may see themselves aswise decision-makers or asgutsy gamblers; as leaders ofchange or preservers oftradition; as lone rangers or ascommitted team players. Suchself images exert a subtleinfluence on an individual’sassessment of the value ofgoods and services. People tendto choose things that reinforcetheir self image and,consciously or not, avoid thingsthat conflict with how they seethemselves.

Good brand managers areaware of self image, and somedeliberately advertise to createa “brand personality” that setstheir product or service apartfrom its competitors.Advertisements for wine andbeer often show groups ofpeople portraying a particularself image and personalitytype. A successful LaserJet adcampaign once linked theappearance of printed outputwith sharply dressed, image-conscious professionals.

The art of brand managementlies partly in communicatingan image that attracts a largegroup of customers. This canresult in widespread preferenceeven in so-called commoditymarkets.

When a brand image is adroitlycomplemented by the design ofa product or service, thepsychological attraction of thebrand is confirmed by the user’sexperience after purchase.

The Experience LifeCycle

To a greater or lesser degree,the act of buying and usinggoods or services requiresconscious attention. The eventssurrounding acquisition and usebecome part of a customer’sexperience. Many things canaffect this experience as itunfolds: the behavior of clerksin retail stores, the actualperformance of a product, or theattitude of support personnel.Over the life cycle ofinteractions between customerand supplier, these events caneither add to the confidence acustomer has in a trustedsupplier or increase thelikelihood that the customerwill make his or her nextpurchase elsewhere.

To understand the customer’sexperience, it helps to have amodel of events that can occurfrom the time a customer beginsseeking a product or servicethrough the time a product isdiscarded or a service is discon-tinued. Each product or servicecategory has its own specificlife cycle, but some features arecommon to many. Thefollowing seven-step modelprovides a useful description.

A Life Cycle ofCustomer Experience

l Clarifying a purpose andselecting a solution

l Ordering what is chosen at anagreed upon price

l Becoming ready to use theselection

l Becoming proficient inapplication and use

l Receiving the intendedbenefits

l Keeping everything workingas it should

l Letting go and moving on

Choosing.

Choosing is the process bywhich the customer becomesaware of a need, finds out aboutalternative solutions, and selectsone to buy. Awareness of needcomes out of what has beencalled “life context,” thedynamic, changing mix ofbeliefs, attitudes, andperceptions that affect eachperson’s response to a good orservice. Awareness leads toinvolvement with goods orservices that might satisfy theneed. If a particular offering isattractive, the customer entersthe stage of commitment andmakes the decision to buy.

Ordering.

Once commitment is made, anorder is placed. This experiencecan be quick and simple, as fora consumer making an off-the-shelf wine selection, orcomplex and time-consuming,as in an industrial setting wheremany intricate negotiationsabout technical features, price,terms, and conditions may takeplace.


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Installation/Set Up.

This is the customer’s time,effort, and expense associatedwith facilities preparation orany other work required toinstall a new product.Installation and set up bring thecustomer’s environment, theproduct, and companionproducts to a state of readinessto fulfill the customer’spurpose. Problems andfrustrations at this critical stageare one of the most commoncauses of dissatisfaction.

Learning.

High technology productsusually call for a learningperiod in which the customerbecomes proficient in using theproduct. This learning processshould be as easy and effortlessas possible, and carry anelement of surprise, to fosterdelight in discovery. At thispoint, a customer finds outwhether the product merelymeets expectations or containssome rewarding extras. Firstimpressions are important.

Using.

This is the stage in the lifecycle when a customer finallyreceives the anticipatedbenefits. Or should. Whenthings go well, the customer’spurpose is met, no problemsarise, and the customer feelsgratified by the good choice heor she has made.

However, a product may haveless effect for the customer’spurpose than anticipated. Itmay be that some other brandwould have served thecustomer better. Perhaps, withtime, the customer’s purpose

has begun to change. Over aproduct’s lifetime, many events—- reliability problems, newproduct introductions,alternative solutions, andmodified needs – can erode acustomer’s satisfaction. Overtime, this erosion may lead tothoughts of replacing a productor service with an updatedversion.

Supporting.

A wine connoisseur mightinvest in a climate-controlledcellar to ensure that his or herwines age without bruising. Ingeneral, product support fromthe customer’s viewpointincludes the ongoing time,effort, and expense incurred formaintenance and use. Inmission-critical applications,expense can include downtimecosts during the intervals theproduct is unavailable.

If something goes wrong, acustomer will be at a peak ofemotional engagement with theproduct. The responsiveness ofa supplier is crucial at this time.If a situation is not handledwell, the customer can developlong-lasting feelings of angerand hostility. Conversely, whena situation is handled flexiblyand with an attitude of personalcaring and concern, thecustomer’s emotional responsecan be strongly positive. Fieldexperience shows thatcustomers often feel morepositive about us after a well-handled crisis than they wouldif the crisis had never occurred.

Disposal/Discontinuance.

The final phase of the customerexperience life cycle comeswhen the customer decides todiscontinue use of a product orservice. Some call this stage“resolution” to emphasize thatdisposal is not just a physicalact, but entails a psychologicalprocess of letting go, wherebythe customer resolves his or herfeelings about the entireexperience. By reflecting ontheir interactions with theproduct, service, or its supplier,customers form lastingimpressions that guide theirfuture choices. Thesereflections can have a majorinfluence on brand loyalty, soattention to the customerrelationship is important evenat this late stage in the cycle.

Making the “letting go” easierand less painful through rebateprograms or product take-backinitiatives can maintaincustomer goodwill through thetransition period.

Quality 1 on 1

At HP, people commonly thinkof quality as a producer does.Day by day, employees arebusy managing their productsand processes. Qualitydepartments are busy too,helping to improve the fitnessof products, the control ofprocesses, and the skills ofpeople. As a result, evencustomer advocates among ustend to look at quality issues asproducers rather than asconsumers. We don’t fullyunderstand the experiences thatcustomers have when they dobusiness with us. We don’talways know their point ofview. Though products have


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their own qualities, quality isn’tcomplete until it makes animpression on someone.

Quality 1 on 1 means knowingquality as a customer does andsystematically acting on thatknowledge to grow a business.

Knowing quality as a customerdoes means having moreawareness of how customersfeel about their experienceswhen they do business with HP.It means developing intuitionthrough personal experiencesand stories, not just relying onsurvey statistics. It meansunderstanding individual cus-tomer problems and goals whenwe can, and collaborating onsolutions. It means knowinghow customers sum up theirexperiences and decide whetherto do more business with HP.

Learning how to know in thisway — and caring enough toact — is the essence ofbecoming customer centered.

Acting means more than fixingproblems. It flows fromgenuine commitment to acustomer’s success. It meansseeing our people andoperations as a customer does,and creating customer-centeredquality systems that span entirevalue chains. It meansinfluencing not only a businessunit’s performance, but also theperformance of partners,suppliers, and channels thathave a material impact on thecustomer experience.

Quality 1 on 1 heralds a shiftfrom quality as a set of beliefsand practices to quality as apurposeful game plan.Each “1” in the phrase

represents an individual humanbeing, with unique and specificneeds. Understanding theseneeds is important, but there arebarriers to such customerintimacy.

Barriers are created by aproducer’s preoccupation withproducts and processes, and bythe anonymity of massmarketing through third partychannels. Despite this, Quality1 on 1 asks us to earn loyaltyfrom each individual customer.

Each “1” also represents awhole company as a businesspartner. Business-to-businessrelationships are humanrelationships. In businesssituations, HP can becomemore sensitive to individualneeds, with awareness of howthe functional role of eachindividual within a customercompany affects his or hergoals and attitudes.

Other successful organizationscling just as tenaciously to theirstandard ways of doing thingsas we cling to ours. HP can bemore sensitive to the cultureand operating practices ofcustomer companies, and stillbe able to stand firm andprotect our own interests. Tocustomers, our company couldappear not just as one company,but as their company too —their favorite company to dobusiness with.

Quality from the customer’sviewpoint is not just a matter offacts and figures, or cold-blooded judgments aboutfitness and cost. While therational mind plays animportant role in choosinggoods and services, the

influence of emotion is oftenunder-appreciated. Emotionscan become involved at anytime during the process of buy-ing or using a product.

Quality 1 on 1 can helpimprove personalunderstanding at both the levelof reason and the level ofemotion. More understandingcan lead to better decisions andopportunities to take action andgrow a business relationship.

A Roadmap for Change

With these ideas in mind, weset about the actual process ofcreating change in HP. As Imentioned earlier, HP hasstrong values. We are a value-driven company, not a policy-driven company. This meansthat our individual businessunits have enormous freedomof operation, as long as theyoperate within the values. So,even though our CEO LewPlatt is a proponent of Quality 1on 1, he will not demand, topdown, that each business adoptit. Instead he expresses hissupport and his desire forchange, and encourages eachbusiness to decide its bestcourse. The job of Quality is toprovide a practical path forbusinesses to take, and helpthem through the change pro-cess.

There is an overall implement-ation plan we recommend tobusinesses. It is a broadframework for action — more apicture of the territory than aspecific procedure. We want toleave lots of room forexperimentation and discovery.Quality 1 on 1 is so new thatno single organization has done


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all of it. Thus this changeprocess must also be a learningprocess, where organizationscan profit from the discoveriesof others. We must revisethings as we go, and be willingto discard what doesn’t work.

The first step is building thecase for change. This meanscreating a picture of what ispossible and how customersand the business might benefitfrom a more customer-centered approach to quality.Visions for change will varyfrom business to business,since they have differentcustomers and competitiveissues.

The start of this process wasHP’s Worldwide QualityConference in November1995. Lew Platt and thechairman of the Planning andQuality Committee, NedBarnholt, each shared theirhopes and expectations for thechange effort. We conducted anumber of tutorial and “bestpractice” sessions at theconference to stir interest andbuild knowledge among theattendees. After theconference, a number ofpeople in Asia, Europe, andthe Americas spread the wordin their own organizations.Lew has followed up withmessages to GeneralManagers, and we’ve sent outmultimedia informationpackages to help in communi-cations.

The second step is revising therole and value-addedcontribution of the qualityfunction itself. There are about2000 quality professionals inHP today. Over the years, HPhas benefited from the focus,expertise, and support of

quality departments around theworld. The quality functionintroduced Hoshin planning,TQM, and modern processmanagement to the company.Quality departments were alsoinstrumental in achieving atenfold improvement inreliability during the 1980s.

Many people in qualitydepartments are strongadvocates of customersatisfaction and have workedhard to help others aroundthem see the customer’sperspective. However, theiractual results have beenuneven.

One reason is that qualitymethods were exported acrosscultural boundaries withoutconsideration of nationaldifferences. The export ofJapanese TQC tools in the1980s met some resistance inthe US and elsewhere becausethe cultural issues were moreor less unrecognized at thetime.

Another reason is that, forsome people, quality becameidentified with specific toolsand programs, and not withtheir ultimate impact on thecustomer. Some qualitydepartments — including thecorporate department —became known for introducingtools and rigidly insisting theybe used a certain way.

So a fundamental element ofthis change effort is the qualityfunction itself. We havedeveloped new job de-scriptions, self-assessmenttools, and training for peoplein the function to use. We areencouraging qualityorganizations to critically

examine their current workand move toward morecustomer-centeredcontributions.

In particular, we want to seeQuality Managers in eachbusiness unit step forth to takeleadership as change agents.This means working closelywith their General Managers,who act as necessary changesponsors in their businessunits.

In the third step of ourroadmap, expectations andaccountability for results needto be made explicit between aGeneral Manager and QualityManager. In ourbenchmarking studies, we sawthat leadership from both isessential. Strong, personalleadership from the GeneralManager is necessary. Theytend to attract strong,committed Quality Managerswho galvanize cross-functionalchange and stimulate anattitude that empowers peopleto act on behalf of customers.The end result is an enterprisethat thinks and acts in acustomer-centered way.

Becoming Customer-Centered

Next in the process is acultural shift from one toooften preoccupied withinternal issues and actions, thatis producer-centered, to onethat puts equal emphasis onthe whole product experienceof the customer. We haveidentified three essentialelements for customer-centered organizations.

One is developing a truepassion, a genuine enthusiasm,


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for customers. In ourbenchmarking visits, a verystrong pattern became evidentin all the leading companiesand HP entities we surveyed.Every organization withnoteworthy quality andcustomer satisfaction was alsonoteworthy for its style ofleadership.

There is something specialabout these organizations,something about the attitudeand energy of the people thatmakes customer satisfactionurgent and personal, not long-term and abstract. Leaders ofthese organizations convey,through their personal valuesand actions, the importance ofpaying close attention to theoutside world. They understandand reinforce the need for acustomer’s viewpoint to createan outside-inrather than inside-out perspective on theorganization’s performance.

Another is organizing aroundcustomers. This includesfundamental organizationalstructure, commitment toproblem resolution, robustperformance measurement,recognition and rewards, andcommunications.

An effective customer-centeredorganization maximizes theopportunity for direct, personalcontact between employees andcustomers. In our company,this has meant creatingopportunities for contact, evenwhere such contact is not anatural occurrence. Forexample, a printer organizationsponsors “dealer days” toengage design engineers withcustomers at the point of sale.Another has sponsored “Day inthe Life at Home” and “Day in

the Life at Small Offices”studies to capture how productsare actually used by people inreal life. Other organizationsencourage all employees,regardless of their regularassignment, to spend timedoing telephone support. Thisway, they hear first-hand aboutcustomer issues.

Last is deep understanding ofcustomers. This goes beyondmarket research studies andcustomer satisfaction surveys.In some of the bestorganizations, an approachcalled Customer ValueManagement * is enablingdecision makers to integrate allsources of customer data, bothanalytic and anecdotal, todevelop long-term customerloyalty. This is the kind ofloyalty that creates repeatbusiness and referrals to friendsand business associates.

Next in the roadmap comes thequality system. A qualitysystem is the aspect of abusiness system that mostdirectly affects the experiencesof customers. It includes thehuman resources, processes,and measurement systems thatare essential for ensuring that avalue chain meets theexpectations of its externalcustomers. A customercentered quality system goesbeyond meeting expectations toanticipate and serve acustomer’s “whole product”needs at each stage of theexperience life cycle.

Many businesses today areoutsourcing many operationsnot believed to be a corecompetence. In HP’s case,outsourcing is widespread

where we believe an advantageexists in a third party.Depending on the organization, one can findexamples of outsourced design,manufacturing, distribution,sales, and even support.

However, traditional models ofprocess management andquality systems don’tadequately cover suchdispersed activity. Inparticular, an integrated view ofthe supply chain’s performanceas seen by customers ismissing. Customers havedifferent needs, depending onwhether they are a technical“chooser,” an economic buyer,or an end user. We are justbeginning to understand andmanage value chains in acustomer-centered way, asvalue delivery systems thatprovide a superior wholeproduct experience.

Having a design for a qualitysystem isn’t enough. It must begiven life through people.There can be an enormousamount of flexibility inorganizational placement ofresources, so long as theoverall system is supported. InHP and other companies, wehave seen large differences inwhether these resources areplaced within the qualityfunction or within linefunctions. Companies webenchmarked ranged from ahigh of 7% in the qualityfunction to a low of 2%. Thenumber doesn’t seem to matter,as long as quality is madepart of everyone’s work andthe system as a whole issupported with skilledspecialists wherever they areneeded.

*This approach builds on the work of Bradley T. Gale, described in his book, Managing Customer Value.


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The last stage of the roadmap isongoing operations andrenewal. This entailsestablishing an ongoing mea-surement and managementprocess that will endure beyondthe change effort itself.

A review of HP measurementsystems revealed severalfactors that are common amongsystems that no longer met theneeds of the organization.Three of the most commonfactors are:

1) The measurement systemdid not monitor theaspects of organizationalperformance that createvalue from a customerperspective. This oftenleads to a situation inwhich organizational goalsare achieved, but customersatisfaction and loyalty areunaffected.

2) Metrics did not relate tobusiness objectives. Insuch instances, the metricsfailed to link performanceto what the organizationhas needed to achieve itsbusiness goals.

3) Metrics did not explainwhat is happening.Performance results didnot adequately identifyperformance issues orenable analysis to explainthe underlying causes.

In HP, high-performingorganizations use a balancedscore card approach to addressthese issues. The best of thesesystems contains bothcustomer-centered andtraditional internal measures.They monitor performance tocritical objectives, and integratewith the organization’smanagement processes. Inaddition, they measure cross-functional performance withhistorical and predictivemetrics that provide value at allorganizational levels.

Conclusion

“To achieve greatness, startwhere you are, use what youhave, and do what you can.”

– Arthur Ashe

Arthur Ashe’s quotation is wiseadvice. Huge changes cannothappen overnight, nor can any

change manager neglect thevery real constraints that existin any organization. Yet avision for change, applied withpersistence and the sweat ofhard labor, can indeed lead togreatness.

Quality 1 on 1 has had anotable affect on many HPorganizations. It has affectedhow they think about theircustomer relationships, theirquality systems, and theirquality organizations. Since itis a voluntary program,businesses vary in theirapproach and rate of progress.But it is clear that “becomingcustomer-centered” is a themethat has caught the imaginationof many in HP. Attention to thewhole customer experience andto quality systems that spanvalue chains has never beenhigher. As a result, I believethis company with its strongcustomer reputation willbecome even better in thefuture.


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Rafael Echeverria is theco-founder and presidentof Newfield Consulting.Since 1985, Dr.Echeverria has beencommitted to thedevelopment of anunderstanding of humanbeings and organizationsbased on the role playedby conversations,language, and emotions.He has developedprograms and beenconsultant to a widevariety of organizations,from multi-nationalcorporations togovernmental agencies,and has served as aconsultant to the UnitedNations InternationalLabor Office for 14 years.A scholar, consultant, andwriter, he is a member ofthe World Academy ofArt and Science, and haspublished works on thephilosophical traditionsthat have led to ourcurrent understanding ofthe role of language inhuman life.Dr. Echeverria has alsobeen the key designer ofCQM’s ConversationalCompetence workshop.

EMOTIONS : AT THE HEART OF BUSINESS

PRACTICE

Rafael EcheverríaNewfield Associates (USA), Newfield Consulting (Latin America &Europe)1997

Some years ago, a friend of mine who is a successful businessconsultant in Europe asked me, “What do you do when you consult thatis significantly different from what I do?” “Many things,” I said; “butthe most important of them all is dealing with emotions. When I go to acompany, one of the key things that I pay attention to, and where Iintervene later, is the realm of emotions.” “Emotions?” he said. “Whatdo they have to do with business practices?” “They are at the heart,” Ianswered.

Why should we care about emotions in business?

A common belief is that business should be emotion-free. When weexamine business performance, we tend to concentrate on a company'sstrategic choices, its functional and political structure, individual andgroup competencies, work and business processes, technologicalsupport and information systems, and so on. There seems to be no placefor emotions here. Or is there? When we assess results, we look atproductivity indicators, profitability, market share, and other hard,quantifiable facts. There's not much place for emotions here, either. Oris there? When we speak about management, we often say (as aparticipant in one of my programs recently claimed) that “a goodmanager must never show his emotions!” But is that valid?

Some of the bad reputation that emotions have had in business is welldeserved. Emotions have often been featured in what is regarded as the“soft” approach in business consulting, usually in relation to the field oforganizational development. People may be asked to expressthemselves, to vent their emotions, and to engage in interactions thatallow them to “feel better.” The underlying assumption is that if peopleare able to “feel better,” the company will end up “doing better.”Unfortunately, this is not the case. Usually, the “feeling better”approach produces little difference in terms of the group's or thecompany's performance–the “soft” approach has very often produced“soft” results.


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But does it need to be this way?One of the aims of this paper isprecisely to challenge thisassumption. I am committed to“hard” results–the same kind ofresults aimed at by processreengineering, TQM, and manyother “hard”-side approaches toconsulting. But I want to identifythe factors that have oftenprevented these “hard”-sideapproaches from living up totheir promises. I suspect that atleast some of these factors maybe found right where the“hardsiders” dared not search:inside the very tool bag of the“softsiders.” That is to say, inemotions.

Many people have now come torecognize that factors such asintellectual intelligence, level ofcompetence, design of standardprocedures, and levels oftechnological support are notenough to predict the success ofindividual or organizationalperformance. Apparently wehave been missing somethingimportant in our attempts toexplain and anticipate better theway people and groups perform.And there is growing suspicionthat emotions may havesomething to do with what hasbeen missing. For example, consider the kindof “hard” consulting approachesthat, seen on the design table,seem failure-proof. Theseapproaches often come backedby scientific research, soundstatistical methods, andtechnological support. Processreengineering is a case in point.It was designed to addressfundamental business concernsby improving businessperformance. If people wouldonly put reengineering correctly

into practice, the assumptionwas, the company's performancewould almost certainly, go up.As it turned out, this was a big“if.” People very often turneddown process reengineering, orat least did not take fulladvantage of it. Not only didprocess reengineering, aimed atincreasing effectiveness, provewidely ineffectual; it was noteven able to efficiently engineerthe process of its ownimplementation.

This left the main proponents ofprocess reengineeringwondering, what went wrong.What was missing? And whatwas blocking people from fullyputting this approach into use?In frustration, those who claimedthey had the key to businesseffectiveness claimed thatmanagers, particularly middlemanagers, were resisting processreengineering, fearful ofconsequences its implementationmight produce.

Frustration? Fear? Perhapsacknowledgment and allowancefor the key role emotions playmay be what has been missingfrom the very beginning. And infact we have recently witnesseda revival of interest in the topicof emotions, crowned by thesuccess less than two years agoof Daniel Goleman's book,Emotional Intelligence.

The issue is not emotions inbusiness practice for the sake ofemotions themselves; I am notadvocating a more (or less)emotional organization. What Iam interested in is theorganization’s effectiveness andits business success. In this

paper I will suggest howemotions in the businessenvironment can be and need tobe managed; next I will look atemotions in business practices ingeneral; then I will focus moreclosely on the role of the“observer” on how emotionalstates influence action, and onthe role of the manager infostering emotionalenvironments that supportproductivity.

Managing the emotionalenvironment: A matter ofplacing and removingsnakes

To illustrate my argument that abusiness’s emotionalenvironment can in fact bemanaged, let me tell you twostories, told to me by twodifferent friends.

One friend got up early on arecent Sunday to go hiking. Hewas in very good spirits as hetook the winding path up a hill.It was bright and sunny; heenjoyed the view, the breezetouching his face, and the birdssinging all around him. Hebegan anticipating what hewould do the following day. Lifeseemed to smile at him and heexperienced a strong sense ofoptimism. He even thought tohimself, “No doubt about it; I’min a good mood.” Suddenly,however, he noticed a snake afew yards ahead, blocking hisway. He stopped. The snake waslarge, and my friend didn’t knowwhether or not it was poisonous.Instantly he forgot about thebreeze, the birds, the followingday. His concern was nowtotally different. He was worried


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about his survival. Would it besafe to continue ahead? Would itbe better to turn around andretrace his steps? He could feelhis heart beating. He wasimmobilized. Now, instead offeeling optimistic and joyful, hewas afraid.

A few days after we heard thisstory, another friend told me thatshe felt the story was verypowerful, particularly the snake.“Can’t you see,” she told me,“to change existing emotionalconditions is a matter of placingand removing snakes? I justtested it and it works.” “What doyou mean?” I asked her. “Letme tell you,” she said. “Duringthe last month or so, I have beenpuzzled by the fact that my six-year-old daughter seemed to bein a very happy mood everymorning when I went to herroom to wake her up. Shesmiled and kissed me. But then,twenty minutes later, when wegot together for breakfast, she'dbe upset and wouldn’t speak toanyone. I couldn’t understandthis shift in mood. What washappening? After I listened tothe snake story, I said to myself,‘There must be a snakesomewhere. There must besomething that changes hermood in the same way the snakedid in the story.’ So I began tofollow everything my daughterdid during those twenty minutes.What I found out was thateverything went all right untilthe moment she had to decidewhat clothes to wear to school.At that instant, her moodchanged, and she became veryupset. That’s the way she alwaysappeared when she came tobreakfast. I decided to removethe snake. So now, before she

goes to sleep at night, we gettogether and decide what shewill wear to school the next day.We put everything out on herchair. Now she arrives atbreakfast in the same goodmood she wakes up in.”

By watching her daughtercarefully, tracking her morningroutine, the mother in this storywas able to pinpoint the momentthe little girl’s mood shifted. Shewas able to discover the snake.And once she discovered thesnake, she was able to intervene,restructure her daughter’sroutine, and transform herdaughter’s mood from a sullenone to one of joy.

It is my contention that amanager in business, like thismother, must study people’semotions and discern which areconducive to the goals set by theorganization and which obstructthose goals. If the managerassesses that counterproductiveemotions prevail, he or she mustbe able to remove the triggersthat produce the negativeemotions, just as the parent inthe story removed the clothesdilemma for her daughter. Thus,to change emotional conditionsis a matter of placing andremoving positive and negativesnakes. I maintain that managerscan be trained to monitoremotions, design emotionalenvironments, and intervene inemotions that are not conduciveto the organization’s goals.

Emotions and businesspractices

There is no business practicethat does not involve a particularemotional content. Humanbeings always live in anemotional environment;everything they do comes froman emotional context and carrieswith it an emotional content.Moreover, the emotional contentof each business practice is apivotal factor in its effectivenessand success–or lack of success.Some examples:

l Customer satisfaction.Weall know that business successis tied to customersatisfaction: Satisfyingcustomers drives a companytoward achieving its goals.This is so widely acceptedthat the declared goal of manycompanies has become, quitesimply, to produce customersatisfaction. I contend that afundamental differencebetween a “satisfied” and an“unsatisfied” customer is thecustomer’s emotions. Toproduce a satisfied customerimplies the production of anemotional state that thecustomer associates withbeing satisfied. Theproduction of that emotionalstate, then, is the goal ofbusiness today.

l Leadership andmanagement.A keydifference between good andpoor leadership lies in theemotions each generates.People often refer to theseemotions as “motivation” or“morale.” Good leaders andmanagers motivate people to


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perform better and to gowillingly beyond what theythemselves are accustomed todoing. These managers allowpeople to see possibilities thatthey could not see before andto take actions that they werenot otherwise able to take.Napoleon once said that “inwar, three quarters turns onmoral matters; the balance ofmanpower and materialcounts for the remainingquarter.” I would say the sameabout business.

l Strategic planning.Emotionsare related to strategicplanning because emotionsactually predispose usdifferently toward the future.If we find ourselves in adepressed emotional state, thefuture will look grim; if wefeel optimistic, our future canlook bright. Therefore, everyvision of the future entails anemotional component. A goodway to assess a company’semotional state would be toexamine its vision and itsmission, then to ask how thecompany’s members’ feelabout both.

l Sales. The salesperson’scapacity to elicit from thepotential customer someemotional response associatedwith the possibility of owninga given product or obtaining agiven service is a key factor inthe sale. In fact, there will beno sale if the salesconversation does notgenerate the necessaryemotional reaction. Highlyeffective salespeople not onlybring the right emotional mixto the sales conversation, but

manage the emotional climateand improve upon itcontinuously. MartinSeligman1 has shown us thatthere may be no betterpredictor of saleseffectiveness than theemotional competence andrepertoire of the salesperson.

l Team Work. Without somebasic emotions team work isimpossible. Trust is vital;when distrust reigns,coordination of action ishighly inefficient becausepeople's commitment doesn’tmean much.

Trust is only one emotionalcomponent of team work,however. We have many otherpositive and negativeemotions that also havedecisive impacts on the way ateam performs. On thepositive side, for instance, wecan point to the sense ofambition, commitment,belonging and ownership thatcan and should be developedamong team members. On thenegative side, we can identifyemotions such as apathy,resentment, fear, or evenpanic or despair, all of whichmay affect team members.The key question is: Can theseemotions be managed? I claimthey can. Moreover, I claimthat managing emotions isactually the most importantingredient of effective teamleadership. A good teammanager should know how toidentify emotions, figure outtheir sources, assess theirimpact, and intervene to dilutethe negative ones and toregenerate the positive ones.

In a good team the team as awhole–its members as well asits manager–know how toeffectively manage theemotions that result fromworking together and tocultivate the right emotionalmix to support and enhanceeveryone’s performance.

l Marketing. Evoking the rightemotions in the customer is abasic aspect of marketing.This is why images that elicitdifferent emotions play suchan important role inadvertising. Emotionalresponses to our marketingefforts can ultimatelydetermine the success orfailure of our brand, ourproduct, our service, even ourcompany.

l Innovation and creativity.Some emotions areconducive to innovation andcreativity; others are not. Forexample, it is very difficultto innovate and create whenfear, apathy, or resentmentrules. Innovation andcreativity often benefit froman emotional climate ofopenness–a climate thatfosters willingness to let goof long-held values andbeliefs in order to step outinto the unknown. There arerisks that need to be takenbeyond applying TQMtechniques or redesigningwork processes. Innovationand creativity requirereadiness to make mistakes,to go down the wrong alley,even to fail. They maybenefit from an emotionalmix that includesplayfulness and lightness.

1Seligman, Martin. Learned Optimism. Alfred P. Knopf: New York, 1990.


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But this mix is not what weget when we are afraid. Nomatter how strongly acompany may want to bemore innovative and creative,if our emotional mix is notconducive to freedom andopenness of innovation andcreativity, innovation andcreativity will be impaired.

l Learning. Closely related toinnovation is the connectionbetween learning andemotions. We know alreadyhow important learning is forbusiness organizations today.Many of us feel that in orderto move successfully into thefuture, companies musttransform themselves intolearning organizations.2

Learning is what allows abusiness to keep its viabilityin a changing environmentand to respond to thedemands of expandedcompetition. A company thatis not prepared to transformitself permanently–and this iswhat learning is about–maynot survive. Again, emotionsare important preconditionsfor learning. The opening orclosing of learningpossibilities for theorganization as a whole andfor its individual memberswill depend upon theemotions that prevail in acompany. Under certainemotional conditions (such asfear of exposing lack ofskills), learning becomesimpossible. Yet under anotherset of emotions (Such ascuriosity and enthusiasm),learning becomes a naturaleveryday process.

The role of the “observer”

The results that we asindividuals or organizations getin life depend substantiallyupon the actions that we take ordo not take. If we are notsatisfied with the results we areproducing, we should changethe way we are acting.Sometimes, though, turning ourattention to our actions provesto be insufficient. We realizethat we are not satisfied with theresults we are getting, but wesimply don't know how tochange the situation. We findourselves up a blind alley.Therefore, we may need to askourselves about the kind ofobserverof the world we are.(This point has been developedby Chris Argyris, RobertPutnam, and HumbertoMaturana, among others.) Therole of the observer is importantto our understanding ofemotions in business.

Our competitors are differentfrom us not only because of theactions they take, but becausethey are different from us asobservers. That is, they perceivethings that we cannot, and weperceive things that they cannot.And, two different observershave different capacities foraction–because every actionarises from a particularperception of reality. In a givensituation, then, one observermay be better able to cope thananother and therefore may havemore power than the other.

A key point is that we are notcondemned to be forever theobserver that we currently are.We can learn, and we can

change the way we observethings. We can even makeourselves a more powerfulobserver than we were before.But, if we don't recognize thatwe are in fact observers ofreality, we may limit our abilityto engage in the kind of learningthat will transform us into morepowerful observers.

Observing does not mean meredispassionate viewing. Wehuman beings have a particularway of observing. First, wecare; things matter to us.Caring is basic to the wayhuman beings stand in theworld. And because we care, webring concerns to our way ofbeing. Our concerns, in turn,affect how we relate to time,particularly to the future. Wetake care of our concerns in thepresent in order to create adifferent future, even though thefuture may only be momentsaway. It is difficult to separatethese three factors–care,concerns, and the importance ofthe future–because they all forman integrated whole from whichwe act.

The emotional component inthe role of the observer iscritical to the nature ofleadership. Depending on theemotions leaders findthemselves in, they will observedifferent problems, possibilities,and solutions. What may seemto one person to be a problemmay seem a great opportunity toanother. What may look to oneperson like a solution maypresent a big problem foranother. People in a companywhere frustration and passivityprevail may not see as many

2De Geus, A.P. “Planning as Learning,” Harvard Business Review66, no.2 (1988): pp. 70-74.


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possibilities as people in anothercompany with a different, morepositive mix of emotions.

Our perceptions of problems,possibilities, and solutions, eventhough influenced by ouremotions, are not necessarily adirect result of them. We may bediscouraged and still be able toobserve possibilities andsolutions; and being in a goodmood does not necessarily blindus to problems. This happensbecause our perceptions ofproblems, possibilities, andsolutions are affected not onlyby our emotions but by theassessments we make aboutwhat is going on. Emotions andassessments are not the same.This produces an interestingdynamic between emotions andassessments. When we assessthat there are problems,possibilities, or solutions that wemay have not seen before, ouremotions change accordingly.Problems may take us to morenegative emotions, whilepossibilities and solutions maygenerate more positive emotions.

There are as many worlds asthere are observers. Dependingpartly on the emotions weexperience, we will observedifferent worlds and,consequently, take differentcourses of action.

That is, depending on the kind ofobserver a person is and on theworld that that observergenerates for him- or herself, theperson will choose to act in oneway or another–and differentresults will follow. If we want tochange the results we get, wemay want to assess and change

the kind of observer that we are.To do so, we have to understandour own emotions and wherethey come from.

Emotions and action

Emotions predispose us foractions, and no human action isdevoid of emotions. If I feelafraid, I may run away. If I feelresentful, I may be predisposedto sabotage what is being doneor to take revenge. If I feelenthusiastic, I may try to moveahead, engaging in doing what Isee as possible. By knowing anorganization's emotionalconfiguration or climate, weknow to what actions itsmembers will be predisposed ornot. The relationship betweenemotion and action is so directthat without being able to feelwhat others feel, we actually canobserve their emotions byobserving how they act.

But not only is human actioninfluenced by emotionalpredispositions; action can alsotransform the emotions we findourselves in. Emotions andaction are mutually dependent.Emotions always accompanyand often specify human action,and also predispose us to act indifferent ways–but it is alsovalid to say that action has thepower to change our emotions.

This new relationship betweenemotions and action is seenbetter through a distinction Ilearned when I worked withFernando Flores. This distinctiondraws a line within the domainof emotional states, separating“moods” from “emotions.”Moods are emotional states

that are the background ofhuman action. Althoughtransient, moods have deeperand more lasting presence thando emotions. We often enter intomoods without knowing exactlyhow we arrived there, like theman in the first story, setting outfor a hike in a joyful moodwithout knowing precisely why. Additionally, all humaninstitutions and organizationstend to have long-termemotional climates–what mightbe thought of as semipermanentmoods. We see this from onefamily to another, from oneschool to another, one sportsteam to another, and also fromone company to another. Appleand IBM have two differentmoods as emotional climates; sodo Colgate-Palmolive andProcter and Gamble, andGeneral Motors and Ford. Evenwithin a single company, theclimates of individual divisions,departments, and branches canbe quite different. We don’tusually find the same climateprevailing across accounting,manufacturing, and sales.

With moods and emotionalclimates, the emotional statecomes first, then action follows.Even when a climate has beentriggered by an event, it oftenbecomes autonomous; theevent may be long past, but theclimate endures. For example,because of Watergate andNixon, we still, as individualsand as a nation, tend to distrustour president. If someone wereto ask us why we feel this way,we might not know the answer.Even if we were to point tosome recent event, we might bedoing so based on theunderlying climate of distrust,


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and not the other way around. Inother words, we might bemistaking cause and effect.

On the other hand, what wecommonly call emotions arethose responses directlytriggered by specific events, likethe snake in the story–responsesthat persist as long as theconsequence of the events arestill present. When theconsequences disappear (forexample, if the snake slithersaway, or if another hiker appearsand identifies the snake as agarter snake), the emotions oftenchange into new emotions. Orthey may persist and transformthemselves into moods. Often,our responses to one single eventmay move from hilarity tosadness to frustration, as in abasketball or football game. Thishappens because emotions havedistinct causes, while moods donot. For instance, I may be sadbecause Michael Jordan missedthe last-minute lay-up that wouldhave won the game. Actioncomes first, then emotionfollows.

Emotions as a domain ofdesign: The role ofconversations

Let’s return to the manager. Inbusiness, I see one role of themanager as that of a well-trainedwatcher and evaluator. One ofhis or her jobs is to assess theemotional climate of hisorganization and to decide whatis missing. Perhaps the businessis already performing well, butthat manager believes that thecompany could move up to aneven higher level of productivity.Emotional states are vital

ingredients in high productivity.Thus, the manager needs toremove any negative snakes thatmay be in the way of hisorganization and replace themwith positive ones. One way todo this is through conversations.

For a very long time, peoplehave felt that a conversation wasa way of speaking about thingswithout actually changinganything. "Don't just talk," theywould say. "Act."Conversations, they thought,were fundamentally passive ordescriptive.

We now know better. We knowthat through conversations wealso get things done and makethings happen. Conversations aregenerative. They change what ispossible. Through conversations,we change our identities andtransform our lives. Moreover,we can change other people'slives and identities as well.People who excel at doing this,we often call leaders.

I claim that business leaders andmanagers are conversationalagents: They accomplish what isexpected from them throughconversations. Most of their timeis spent speaking and listening topeople. Good business leadersand managers are greatconversational agents. Throughconversations they coordinateaction, generate possibilities, anddevelop relationships. Theyevaluate what has been done inthe past, what is missing in thepresent, and what may need tobe done to create a differentfuture. And they create theemotional space in which otherpeople can find meaning at work

and in their lives, developing animportant part of their identities.Every conversation has twobasic components: a languagecomponentand an emotionalcomponent. Both help in howeffective or productive ourconversations are. People oftenpay lots of attention to what theysay but very little to how theysay it. When they get unexpectedreactions, they may exclaim,"What did I say? Did I saysomething wrong?" As it oftenturns out, it was not what wassaid but how it was said thatproduced the unwanted reaction.The language may have beenright, but the emotion waswrong. The emotional content ofa conversation is critical indetermining the outcome of thatconversation. Good businessleaders and managers know this.

Another important factor is theemotional context of theconversation. Sometimes thereare conversations we cannothave because the neededcontext has not yet been created.Context determines thepertinence of a conversation.Good salespeople know this:They will not make a sales pitchbefore setting an emotionalcontext in which their offerwill have a chance ofacceptance.

And conversations also haveemotional consequences. Theycan transform the currentemotional context and modifythe existing emotional climateof a group, a department, adivision, or the entireorganization. By changing theexisting emotionalconfiguration, conversationscan change what is possible for


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a group. They can changepeople's predisposition foraction, setting the stage fordifferent actions and results. Wehave all gone through theexperience of leaving aconversation with emotions wedid not previously have–and witha sense of having entered into adifferent world, where we couldsee new possibilities andanticipate new results that wehad not imagined before.

Through conversations we areoften able to dissolve negativeemotions that may interfere witha company's attaining its goals.We can also evoke emotions thatare conducive to achieving them.We can actually remove thenegative snakes, replacing themwith more positive ones.

Conclusion

I am not saying that a managercan fully control people's

emotions. Nor am I arguing thatall negative emotions arenecessarily bad. For example, ifwe were not able to feelunsatisfied, we would not learn,nor could we develop or makeprogress. Conversely, if we canfeel satisfied, it is because wehave experienced dissatisfaction.

What I do urge is that leaders atevery level of business createenvironments in which emotionscan surface, so that managementcan address whatever generatedthem. Emotions are seldomarbitrary or inconsequential. Sowe should recognize and, whennecessary, deal with them.

As I have pointed out, emotionsaffect how we observe the world,and our observations can lead usto make different assessmentsabout what is going on.However, there is a loop: Ourassessments about what is goingon also create different emotions.

While it is hard to be sure whichis the bigger driver of which, itseems clear to me that the easierplace for a manager to interveneis with the assessments. Theassessments people make oftenprovide windows into theircurrent emotions–and changingthe assessments can oftenprovide a lever to change theemotions. I will be working inthis area next.

Emotions will always be animportant part of working andliving together. At the same time,we don't need to let our existingemotions determine ourperceptions of reality or ourjudgments about what we areable to do. Good leadership,through conversations, canchange the emotional conditionsthat limit what is possible in abusiness. In essence, I am sayingthat it is possible to change whatis possible.


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Robert Dunham, founderof Enterprise Design,works closely withexecutives to designcompetitive enterprises.Enterprise Design focuseson improvingorganizationalperformance through acoordinated approach ofinnovation and design, theredesign of businessprocesses, and theimprovement ofmanagement practices.Robert is co-holder of apatent for theActionWorkflowtechnology developed atAction Technologies, Inc.,and has worked with thelanguage-action approachin business andmanagement for sixteenyears. Enterprise Designis located in Pleasanton,California.

SELF-GENERATED COMPETITIVE

INNOVATION WITH THE LANGUAGE-ACTION APPROACH

Robert DunhamEnterprise Design

Introduction

Companies that do not competitively innovate are on the way toextinction. The changing marketplace, and innovation leaders, willleave them behind. Industry leaders are innovation leaders over thelong run. Our choices are to be drivers, passengers, or road kill on thehighway of business.1 Drivers, the industry leaders, make the rules ofthe game: they lead in innovation. Passengers follow the rules of thegame. Road kill get run over by the rest. Our concern withinnovation is to avoid becoming road kill, and to build the capabilitiesto generate, or maintain, industry leadership.

Being number one in an industry does not insulate you from thenecessity of being an innovation leader. At one time, Sears, K-mart,GM, CBS, and RCA all had stronger reputations, deeper pockets,greater technological assets, bigger market shares, and more powerfuldistribution channels than their competitors. Each was surpassed bycompetitors with fewer resources, but with innovations in how theycompeted for customers. Wal-mart displaced Sears and K-mart withinnovations in distribution, customer relations, inventory control,systems, and targeting markets. Toyota took major market share fromGeneral Motors with higher quality and style for lower costs. CNNmade major inroads on CBS with a new type of broadcasting. AndSony took the market from RCA.2 Even after years of competition,the companies with greater resources could not formulate an effectiveresponse to the new ways of doing business of their challengers. Theycould not meet the innovation challenge.

Yet this challenge creates a serious problem. A commonunderstanding of innovation is that it is a mysterious and luckyphenomenon. It’s synonymous with inspiration and for most of us,either we are fortunate enough to have a moment of blindinginsight, or we only hear about those rare few who seem to havesome special knack for innovation. In this common sense,innovation is not something we can learn to do, and it is unlikely tohappen for us. It is not something we can improve at. The action of


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innovation looks like someone inthe posture of Rodin’s“Thinker,” chin on fist, thinking.At some spontaneous, but notpredictable, moment, a light bulbturns on over their head. It’s amysterious gift.

In a new approach tocommunication, language, andaction, which we will call thelanguage-action approach,innovation is not mysterious. Itcan be seen as listening to theconcerns of customers, engagingin practices for specifying newpossibilities, and having specifictypes of conversations thatgenerate new action. In thisapproach, innovation is a resultof practices. It can be learned,and is a skill that can bedeveloped both individually andorganizationally. It can bedesigned into the procedures ofan organization. To see how thiscan be done, we must look firstat human communication andaction for the roots ofinnovation.

In this paper we make the claimthat innovation is fundamental tolong-term business success, andwill further claim that, based onthe language-action approach:innovation can be developed intoa body of self-generated andcontinuing effective practices;that many such practices havebeen developed and applied in anumber of companies, and haveproduced significant results; andthat the approach allows us notonly to innovate, but also toinnovate in the practices ofinnovation. To support theseclaims we will introduce a newparadigm of action as generatedfrom language, the language-

action approach. We will showhow coordination of action is thefoundation for all work andbusiness. We will also show thatinnovation is a phenomenon thatis rooted in conversationalpractices that generate newcoordinations of action resultingin new value for customers, andthat these practices of innovationcan be designed, learned,improved, and made part of anorganization’s culture.

To help the reader follow theunderlying logic of our thinking,we provide below a section-by-section abstract of the paper.

l Emergence of the Language-Action Approach — Here wewill explain where this newparadigm of action comesfrom.

l Types of Innovation — Herewe list and discuss varioustypes of innovation. The restof the paper will provide thefoundations to understandhow we can develop practicesfor these types of innovation.

l Example of EstablishingCommitment-BasedManufacturing Processes at aSemiconductor Gas-SystemSupplier— This is the first ofthree examples we willpresent of work that has beendone with language-actionbased innovation. Our focuswill be on the resultsachieved, to demonstrate thatthe framework that is going tobe presented is practical andvaluable.

l Overview of the Language-Action Approach— Here weintroduce the language-actionapproach itself, how wegenerate action fromlanguage, and howcoordinating action isfundamental toaccomplishment in business.This gives us the buildingblocks for innovationpractices.

l Example of Business ProcessRedesign at LeadingComputer Manufacturer – wepresent an example of aspecific type of innovationpractice based on thelanguage-action approach,and the results it achieved.

l Language, Action, andDesigning Innovation— Inthis section we introduce thenotion that the language-action approach gives us anew foundation for design,and identifies designquestions for innovation.

l Designing Our Practices andProcesses Into EffectiveAction Conversations — Witha new foundation for design,we show how we can designand redesign the practices andprocesses that structure ourwork and action.

l Self-Generating NewCompetitive Capabilities– Ina short note, we address howto take innovations intoaction, once they aredesigned, based on the keycommitments that have to bemade for a successfuldeployment of aninnovation.


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l Example of DevelopingManagement Practices atKnowledge TransferInternational– This is thefinal example of innovation inintroducing commitment andlanguage-action basedmanagement practice into acompany.

l Innovation as Action andPractice, and the Practicesfor Self-Generated Innovation— In these sections we comeback to innovation, and withthe background we havedeveloped on the linguisticstructure of innovation,identify the types ofconversations and practicesthat establish on goinginnovation, and provide abrief outline for the actionsthat make these practices self-generating.

Emergence of theLanguage-Action Approach

People and their communicationhave long been identified asessential elements ofmanagement and business,although the rigor with whichwe can deal with these elementsof human behavior andinteraction has led most peopleto call these “softside” issues.3

It is widely recognized that theperformance of an organization,as well as its ability to change,are founded in the behaviors andabilities of its people.4 Fromthe perspective of language andconversation, an organization’sactions and changes occur inand come from the language andconversations that it is able tohave. An organization’s currentactions and future prospects arebounded by the limits of these

conversations. Innovation islimited by, or generated by, theconversations people can have.

The Center for Quality ofManagement found that “skill inconversation is a critical void inthe management methods thatthe CQM companies have beenapplying,”5 and in 1995established a study group toinvestigate methods relating tolanguage and conversation. Thesynthesis that this study grouphas developed has drawn fromthe work of the businessphilosopher Fernando Floresand the biologist HumbertoMaturana, among others.

That human life, and action, isrooted in language has been atopic of concern in philosophyand biology for many decades.The role of language as part ofthe living system that we are ashumans is also beingscientifically better understoodand is well presented in FritjofCapra’s recent book, The Web ofLife. Significant in Capra’sreview of the science of livingsystems is the work ofMaturana, who developed withFrancisco Varela a theory oflanguage as a form of“coordination aboutcoordination for living.”6

In the eighties, Fernando Floresintegrated into this insight thework of Martin Heidegger andother philosophers who seelanguage as the way we produceourselves historically, andfurther integrated the work ofJohn Austin and John Searle,philosophers of language whodeveloped speech act theory.7

What he produced is a powerfulapproach to seeing how wecoordinate action in language,

specifically revealing thestructure of effectivecoordination of human action asspeech acts which produceshared commitments ofparticipants in conversations foraction. We’ll call this approachthe language-action approach.It is indeed a new foundation fordesign, which is the subtitle ofhis book with Terry Winograd,Understanding Computers andCognition.

Flores is also an entrepreneurand businessman, concernedwith the practical applicationand market value of thisapproach. He foundedcompanies, in which I workedfor a number of years on teamsapplying the language-actionapproach, that producedpractical applications in thedevelopment of business design,management practice, workflowsoftware technology, and inmajor consulting initiatives.Based on the language-actionapproach he has developed apractical and operational newdiscipline of design based onhuman communication andcoordination. Others haveintegrated the language-actionapproach into fields such asmedicine, sales, education, anddesign.

The approach has been appliedin dozens of companies toproduce more effectivecommunication, coordination,and significant improvementsin organizational and businessperformance, includingincreased sales, decreasedcosts, improved customersatisfaction, and newinnovations. My colleaguesand I have been working in


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business and management withapproaches based on the work ofFlores and Maturana over thelast sixteen years. Thisapproach is a potent new way tounderstand and producecustomer satisfaction, value,improved organizational action,and results. We will introduce aframework of how to increasethe competitive value producedby the actions we take, designpractices for producing theseinnovations, and organize tobring these innovations torealization. This framework forinnovation is part of a largerframework that produces whatwe can call the Self-GeneratingCompetitive Enterprise.

Types of Innovation

First we will distinguish thetypes of innovation we canmake. We will begin byproducing a preliminaryarticulation of what innovationis: innovation in business is thegeneration of new value forcustomers. Competitiveinnovation is the generation ofnew value for customers thatleads them to accept your offersrather than those of yourcompetitors.

Each type of innovation isproduced by certain kinds ofconversations. An organizationcan develop competence at eachtype of innovation bydeveloping competence in thekinds of conversations, the kindsof thinking, that produce them.These competencies can becomeorganizational capabilities bydesigning and establishingregular practices for theseconversations of innovation.

We distinguish types ofinnovation based on the degreeof possible new value theygenerate, the degree of changein current practices required, thekind of generating conversationsthat must be altered, and thekind of organizationalcommitment that is required toproduce them. The types ofinnovation we will distinguishare:

l Improvisation to FulfillCommitments— takingunplanned or non-standardaction as part of navigating toproduce customer satisfaction

l Shifting Standard Practicesand Processes— doing whatwe already do better with newvalue

l New Offers— making newoffers (products, services,results) of new competitivevalue

l New Strategies or Changingthe Game— building powerin the game or building newinterpretations of the purposeand kinds of actions in thegame

l Shifting the CommonSense— shift thebackground of possibilitiesand understanding.

A body of theory and practicehas been developed for each ofthese types of innovation basedon the language-actionapproach. The most powerfullever for innovating value is toshift the background of commonsense, because it opens up new

possibilities in all the othertypes of innovation. Forexample, the TQM movement issuccessful not just when the newquality activities are begun, butwhen the background ofcommon sense (that which wedeem obvious and appropriate)is shifted to see quality as astrategic necessity that everyonemust be concerned and in actionabout. People then begin to seetheir world in a new way, andsee new possibilities for action.The language-action approach isa shift in our common senseabout action, communication,and coordination. Because itopens up a new perspective onproducing effective action thatsatisfies customers, it opens upnew possibilities for all the othertypes of innovation: newimprovisations, standardactions, offers, strategies andgames. We’ll briefly describeeach of these types ofinnovation:

Improvisation to FulfillCommitments: In work wealmost always have somestandard actions we take tofulfill commitments, to getthings done. In the backgroundof this, we also have a readinessfor improvisations which wewill do in order to fulfill thecommitments of the work. Forexample, someone might get intheir car to deliver a package ifthe delivery service doesn’tpick up on time. We all do thisto some extent: we “navigate”in our actions to avoidbreakdowns and barriers andgenerate necessary new actionsto get the job done. Theopinion we have of the skill ofpeople is often heavilyinfluenced by their ability to


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improvise. In the language-action approach, we will see thatthis type of innovation is greatlyenhanced by showing people thestructure of effectivecoordination, and how they cangenerate new action throughmaking effective requests.Improvisations are not sustainedas new standard practices, whichis the next type of innovation.

Shifting Standard Practicesand Processes:Here wegenerate new possibilities fordoing what we already do better.This type of innovation is whatwe are doing in practices oflearning, continuousimprovement, and in incrementalimprovement in processredesign. With the language-action perspective, we caninterpret dissatisfied customersand operational breakdowns asmiscoordination or missingconversations for producingaction. We then look to put inplace the missing conversations,or modify the ones we alreadyparticipate in so that theyproduce a different result. Wecan redesign processes andpractices, and establish newstandards for coordinating actionand satisfying customers.Projects are designed to producenew processes, practices, andteamwork with accountabilityassigned for new results.

New Offers: Here we generatenew products, services, and ormodify internal processes in away that it produces new valuefor external customers. Practicesand competencies can bestrengthened for listening tocustomer concerns, makingassessments of value, and

formulating new offers. There issome overlap between shiftingpractices and processes withinnovating new offers, sinceshifting practices will oftenshow up as new value tocustomers as well. Thedistinction between the types ofinnovation is whether theobjective for the innovation is toshift the value of what is offeredto the external customer or toproduce new value.

New Strategies or Changingthe Game: In this type ofinnovation we review the currentstrategies, or lack of them, andassess what is not effective ormissing to build power into thefuture. New strategies can bebuilt by reformulating what isnot working, or by developingnew possibilities. Newpossibilities can be stimulated bylooking at strategies andpractices from other companies,industries, and fields. To changethe game we are looking not justto perform better or build powerin the current game, but to lookat possibilities of theconsequences of playing adifferent game. For example,shifting the focus for productdevelopment from conformanceto requirements to customersatisfaction will lead to adifferent game being played bymany of the people involved inthe process. This means that wehave to shift our understandingand interpretation of the purposeand allowed types of actions wecan take. Our question here is“Can we replace what we aredoing, its purpose, or thepossibilities we see?”

Shift the Common Sense8: Thistype of innovation increases thespace of possibilities for theother types of innovation. Itbegins with looking for andadopting a framework thatallows us to think “outside of thebox.” The development of newpractices of hygiene followingPasteur’s discovery of germs,and the development of thecomputer, are examples not justof innovations, but of a shift inthe common sense. These shiftschange the assumptions andaccepted interpretations aboutthe world that people live in,leading to new possibilities foraction and opening up newhorizons for innovation. Floresand his colleagues, in their bookDisclosing New Worlds,9

describe how this happens as aprocess in which practices thatare marginal, as the computerwas in its first years, arerecognized as an opportunity toproduce new value, and overtime are moved into mainstreamapplication. They see theentrepreneur in the role ofmoving marginal practices intothe center of common practiceby developing offers of value,innovations, to the commonpractice.

The language-action approachhas two substantial forcesmoving it from being aninteresting, but marginal,approach to becoming afoundation for mainstreampractice. First, it producespossible actions and results thathave been missing in thepast – the capability ofproducing increasedeffectiveness and designableresults from humancommunication and


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coordination. Second, itprovides a powerful foundationfor looking, seeing, and actingto produce innovation fromother marginal practices. Toillustrate the first opportunityafforded by the language-actionapproach, the power of theframework to produce newbusiness results and capability,we’ll review the resultsproduced in a project at amanufacturer of semiconductorgas systems.

Example of EstablishingCommitment-BasedManufacturing Processesat a Semiconductor GasSystems Supplier

The redesign of coordinationprocesses of a manufacturer ofgas system components forsemiconductor manufacturingequipment was undertaken inMay of 1994. This projectimplemented coordination-basedbusiness process redesign, and isan example of producing fourof the types of innovation.Bringing the language-actionapproach as a framework forunderstanding the coordinationsand miscoordinations in thecompany was producing theinnovation of changing thecommon sense. This commonsense led to innovation in newways to improvise to fulfillcommitments, because peoplenow saw more clearly how tostart new action when it wasneeded by making requests (thiswill be further explained in thenext section). New standardpractices and processes wereinnovated with a language-action based analysis andredesign of the current practicesand processes. And finally, the

strategy of the company wasshifted to rely on being able tofulfill more valuable promises inthe manufacturing area due tonew processes.

At the time the project wasinitiated, the company wasoperating at a run rate of onlyeight million dollars a year. Thesemiconductor industry wasentering a period of significantgrowth in the construction ofnew manufacturing facilities.The owners assessed that theyneeded to improve theoperational processes of thecompany in order to growfurther. In fact, they sawthemselves at a point where theywere already working all thetime and falling behind. Theyand their team were gettingexhausted and struggling. Theyhad to innovate in how theyworked or they were going tocease being able to grow.

In a project contracted with theconsulting firm Kairos, Inc., aPhiladelphia-based consultingfirm, I worked as the leadbusiness process designer. Weagreed to put in place newmanufacturing processes andpromised to reduce the cost ofmanufacturing by fivepercentage points of thecompany’s revenue, which wasfully accomplished in twelvemonths. This amounted to acost savings of over two milliondollars a year in the subsequentyear. Working with the owners,managers and staff as acombined team we redesignedthe manufacturing process andorganized the manufacturingteams to enable growth to aforty million dollar a year runrate twelve months later. This

growth rate was much fasterthan the growth of the market orof the company’s competitors.The first skills that weredeveloped were those of the twoowners in operational roles,where they learned to be moreeffective customers of theirteams, and improvedperformance while reducing thenumber of hours they wereworking.

In carrying out the project thepress of growing demandoutstripped the abilities of themanufacturing managementteam after our first six months.I temporarily took the role ofmanager of their primarymanufacturing plant for thesubsequent six months,established the manufacturingprocesses, and developed themanufacturing team and theirmanagement practices. Twoexperienced manufacturingmanagers, for materials andoperations, were hired duringthis time, and a number ofpeople on the team developedtheir skills in team leading andcoordinating action.

We focused on establishingreliable scheduling, reliablematerials supply workflow, andmanaging the workflow hour byhour. The whole process wasdesigned on the basis of makingpromises to customers bothinternally and externally,managing the fulfillment ofthese promises, and making thestate of the whole processobservable at any moment.Roles were established andclarified, and regular practicesof coordination and processimprovement were put inplace. Computer tools were


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created and modified to providefor visibility of key data.

As a result of this effort, notonly was the company able togrow five-fold in one year, but atthe end of the time period theyalso had a manufacturingmanagement team that couldcontinue to grow the company’scapacity and continue toimprove manufacturingperformance. They have sincegrown to over one hundredmillion dollars a year. Inaddition, the team improved on-time performance to consistentlyless than two percent late (frompeaks of over twenty percentlate), and quality reject rateswere improved by an order ofmagnitude.

In this case what made thedifference was to clarify whowas responsible for what, whowas the team leader andcustomer for the work of themanufacturing teams, how tomeasure the fulfillment of eachof the key promises in themanufacturing process, and howthe prior commitments in theprocess were enabled andmanaged. The managers andsupervisors also establishedongoing process improvementprojects.

Several key changes were madeto business processes andmanagement focus of thecompany during this period: 1)the sales team’s attention tomanaging customer relationshipsand customer satisfaction; 2)establishing the ethic andpractices in manufacturing tocommit to only what they coulddeliver — otherwise declining or

making counteroffers; 3)establishing measures andmetrics for observing andmanaging the process; 4)clarifying roles and actions inthe processes themselves; and;5) the necessity of establishingrecurrent practices ofcoordination, review andassessment, and taking newactions. These competencies,new core processes, andmanagement practices werestable and flexible enough tosupport the company’ssubsequent growth. We canbetter understand how thelanguage-action approach led tothese changes by reviewing thelanguage-action approach in thenext section.

Overview of the Language -Action Approach

Conversational Competencies

Now that we have an example ofwhat can be produced withinnovation based on thelanguage-action approach, weare going to clarify how action isproduced in language andconversations, and how thisleads to producing thecoordination of action thatmakes up how we work. Thepower of the language-actionapproach has led CQM todevelop “conversationalcompetencies” training thatintroduces participants to thedistinctions of how action isproduced and coordinated in ourlanguage. This training drawsfrom the field of linguisticscalled “speech act theory” andthe work of Flores and others todevelop this into personal skillsand practices.10

My own first encounter with thisapproach was sixteen years agoin a communication workshopdeveloped by Dr. Flores. I foundthe clarification of how weproduce action in language to beso powerful that it shifted mostof my work practices, as well asmy framework for thinkingabout and producing action. Iwas working in MotorolaComputer Systems at the time asa program manager for softwaredevelopment, managing thework of two hundred fiftyprogrammers. Organizing mywork largely around thisapproach, we were able toimprove our software quality bya measurable factor of ten andreduce our time-to-market by afactor of four in a year.

Producing Effective Action -The Conversation for Action

How do we produce moreeffective action in conversation?What is this structure oflanguage that we can observe,execute, and improve in ourconversations?11 The answer tothese questions can be found inthe basic structure of actionshown in Figure 1, The BasicActionWorkflow/Conversationfor Action* . This is thestructure of communication andcommitment that producesagreements for action betweenpeople, and is the underlyingunit of work for coordinatedaction. This structure has thetwo names it has been given inapplications over the years. Tosee how action is produced inconversation, this structure isviewed as The Conversation forAction.12 It was renamed TheActionWorkflowwhen the

* Editor’s note: the CQM often calls this model an “Atom of Work”


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structure was used as the unit ofprocess for a humancoordination-based approach tobusiness process and workflowdesign, which was developedinto the ActionWorkflow™software system by ActionTechnologies, Inc. In thefollowing description I’ll usethe term “conversation foraction” to denote this structure,which can also be interpreted asan “ActionWorkflow.”

In the conversation for actionthe roles of people in anytransaction can be distinguishedas a customer for satisfaction,and the performer of action toproduce satisfaction (see Figure1). In this loop, opening thetransaction and followingthrough to customersatisfaction takes place in fourphases.13 Each phase iscompleted by an act. The firstphase is completed when the

Customer makes a request. Thesecond phase is completedwhen the customer andperformer agree to “conditionsof satisfaction” that thePerformer is promising toprovide the customer. The thirdphase is completed when thePerformer "declares complete"with the actions he or she hastaken to fulfill the agreement.The fourth and final phase iscompleted with a "declarationof satisfaction" by theCustomer.

Figure 1: The BasicActionWorkflow/Conversation for Action14

This structure is not just a novelidea, but reveals the innatestructure of how we alreadycoordinate in communication.The acts that make up theconversation are the speech actsthat keep two or more people in

the same interpretation of whatfuture action is to be produced,what is agreed upon, and whois going to do what. The actsof requesting and promising areacts we are doing all the time.The structure of the loop showswhat happens whencoordination is successful.

These acts are not mechanical,such as a specific way to talk.A request can show up withover six hundred differentverbs in English that signifydifferent kinds, intensities ormoods of requests (such asask, demand, beg, petition,etc.), and each can bearticulated with varying shadesof urgency, authority, andimplied relationship. Requestsare made with writing, withgestures, and even assumedwith unspoken understandingsof how to move in certainsituations. This shows the

Figure 1: The Basic ActionWorkflow/Conversation for Action


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flexibility and richness of varietywith which we can and do makerequests.

However, this variety is one ofthe reasons we have historicallybeen blind to the understandingthat these are all acts of the sametype, a request, and that this ispart of a fundamental structureof coordination. Another aspectof these acts that has kept themfrom being fully explicit for us isthat the acts are not acts of justspeaking, but are acts that haveto be listened. By this we meanthat if I say “I promise,” it is nota promise for the listenerregardless of what I say if mylistener does not interpret what Isay as a promise. And usuallythis “interpretation” is automaticand immediate, not somethingwe figure out. It’s just theimpression someone’s speakingproduces for us as a listener.What produces future action isthe interpretations that are madein the conversation from what islistened, not from the words thatare spoken in the conversation.Producing effective action is notjust saying the “right” words, butinteracting with the listening ofother people and our ownlistening to create sharedcommitments for the future.

If these acts of coordination aremissing, or we don’t producethem well in our conversationsfor action, we will havemiscoordinations anddissatisfaction. Theconversation for action gives usa powerful way of observingwhat is working and notworking, and moreover, what ismissingin terms of humancoordination. We can then

identify and move to correct thesubstantial waste that arises fromthe miscoordination we are blindto.

Our cultural blindness tohuman coordination producestremendous waste. The waste inorganizations due tomiscoordination is due mostly tonot being competent observersof coordination. In other words,people don’t have thedistinctions to observe with.Once the waste and missedopportunities are made evident,then improvements can be madein the design of roles, recurrentactions, and the competence ofperformers to satisfy theircustomers. Then informationsystems can be built arounddesigns of action to enable andsupport better processes. But thequality of coordination isfundamentally based on thecompetence of the participantsas effective customers andperformers in conversations foraction. As in sports, newequipment for the team can help,but the team's performance reliesmost fundamentally on thecapability of the team to performtogether competitively.

Our lack of distinctions forhuman coordination can be seenin our conceptions of what“process” is. Our language forprocesses has come from twohistorical traditions that havedealt with processes:mechanical and materialengineering (material processes),and computer engineering(information processes). Wemodel processes with thevocabulary and distinctions fromthese traditions. We use terms

such as: “transport, inspect,assemble” for materialprocesses, and “compute,compare, store, transfer” for datain information processes. Thesedistinctions, however, don’thighlight the acts of humancoordination.

Human coordination has adifferent set of distinctions thatare usually poorly represented inthe language of material andinformation processes. Peoplecoordinate with acts of “request,promise, agree, judge, assert”and so forth. Just as thelanguage of information is noteffective to understand materialprocesses, the language ofmaterial and informationprocesses is not effective tounderstand human coordinationprocesses.15

Effective redesign of workprocesses must includecoordination processes as well asmaterial and informationprocesses.16

In Figure 2 we see the kind ofworkflow map that is generatedusing the ActionWorkflow viewof coordination processes.These maps can be used to showa “before and after” map, wherethe “before” map shows theprocess with all of itsbreakdowns, dissatisfactions,and missing components. Thisprovides a starting point for aredesign and the development ofa well-designed process whereroles are clear, conditions ofsatisfaction are clear, and theactions and tools for effectivecoordination are specified. Wecan eliminate waste due tomiscoordination, and design newmore effective structures ofcoordination.


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In the language-actionapproach we also demystifycustomer satisfaction andorganizational behavior.Customer satisfaction is ajudgment by the customer thatwe produce when we fulfill orexceed agreed-upon standards offulfillment. Organizations are anetwork of commitments17 thatshape the actions that are takenthat produce the results that areoccurring. Coordinated action isproduced through acts thatpeople perform and can learn todo better. To innovate is toproduce new configurations ofaction that deliver newcompetitive customersatisfaction and value. In thefollowing case study we will seehow substantial financial andother measurable performanceimprovements were achieved byanalyzing miscoordination andredesigning their recurrentactions of coordination.

Example of BusinessProcess Redesign at aLeading ComputerManufacturer

Now that we see the structure ofaction, how it is produced inlanguage, and how this makesimproved coordination possible,we will review an example ofinnovation using this approachin a business process redesignproject done at one of theworld’s leading computermanufacturers. Remember,business process improvement isone kind of innovation.

This project was mounted byAction Technologies incooperation with BusinessDesign Associates. Bothcompanies were founded by Dr.Flores and base their work onthe language-action approach. Iwas working at ActionTechnologies as head of

operations. TheActionWorkflow approach hadbeen introduced to the presidentof the computer manufacturer,and he asked that it be appliedto a process that had alreadyundergone significantimprovement as part of thecompany’s own qualityprogram.

The process to be addressedwas the engineering change andnew product introductionprocess at a major PCmanufacturing facility. Thechallenge was to further reducethe cycle time for implementingengineering changes on themanufacturing line. Thecompany staff had calculatedthat the financial impact ofdelays in the engineering changeprocess, due to the largevolumes they manufactured,averaged eight hundred thousanddollars per day. The process had

Figure 2: Example of a Business Process Map with ActionWorkflows 18


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previously undergone a cycletime reduction from an averageof thirty-two days down tofourteen days. Within a fewweeks the cycle time wasreduced further with theActionWorkflow approach toonly seven days. In laterprojects, the staff was trainedand a workflow softwareapplication was developed thatenabled the process to befurther improved until itreached a one-day cycle time.

What provoked the immediateimprovement was people seeingthe difference in who isidentified as a customer in theActionWorkflow approachversus the company’s qualityprocess flow approach. In thequality process the customerwas identified as the nextperson or organization in line toreceive the flow of the process.

For example, if the hardwaredesign organization generates ahardware design change, in thisapproach the customer is thenext organization in line whoreceives the change. However,in the ActionWorkflowapproach, the customer is theone who makes a request and towhom a commitment is made.From the language-actionperspective, the customer wasbeing ignored in the qualityprocess approach (see Figure3), with no commitment beingmade to provide a response.The hardware designorganization did not insist on,nor did the manufacturingorganization see that it wasnecessary, to respond quickly tothe design change request,because the customer was seento be the manufacturingorganization, who organizedaround its own priorities.

In this case, both the hardwaredesign organization and themanufacturing organizationwere operating with aninterpretation of who was thecustomer, who was to beresponded to, that resulted indelays. A similar shift inperspective allowed thecompany’s staff to see a numberof process reconfigurations thatbecame possible from theActionWorkflow perspective inthe first several days after itsbeing introduced.

This project provides anexample of the innovation ofshifting the common sense –produced through this projectwas a shift of what peoplecould see that previously theycould not see. They becamedifferent kinds of observers,enabling them to designdifferent actions. The

Figure 3: Comparison of Who is the Customer in the Quality and ActionWorkflow processes


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language-action perspectiveallowed them to see acts ofcoordination of action, or whatacts were missing or ineffective.Then, using theActionWorkflow businessprocess tools they began toproduce innovation in processesby reconfiguring how theycoordinated action, clarifiedroles, and eliminatedmiscoordination with new andmore effective structures ofrecurrent action.

Language, Action, andDesigning Innovation

Our examples have shown thatthe shift in the common sense tothe language-action approach isa move of innovation that opensup new innovation possibilitiesin all the other types ofinnovation, e.g., new standardpractices and processes. Wewill now describe how wedevelop these new innovationsby engaging in practices ofdesign: seeing what is missingin a new way, and seeing what ispossible in a new way.

The conversation for actionshows how we produce action inlanguage. This connectionbetween language and actiongives us a new framework fordesign, and this gives us a basisfor developing practices forinnovation. One of the greatpowers of this linguisticperspective is to see that allorganizational, in fact allhuman, action is produced withand in language. Thus, toproduce new possibilities andaction, we can “move inlanguage.” That is, make an actin language that provokes aresponding act in language. By

“language” here we do not meanonly “words,” becausecommunication occurs in manyways besides words. We canonly coordinate many taskswithout speaking, by performingacts of coordination thatproduce interpretations in eachother. For example, we mightbeckon someone with a wave ofthe hand, and they have aninterpretation that this means“come here.”

With this understanding of howlanguage and conversationsproduce action, we can observethe actions, or missing actions,around us differently. We canask two questions that are keyfor designing new action:

“What conversations(interpretations, practices andspeech acts) are producing theactions of my organization?”

and

“What are the missingconversations (interpretations,practices and speech acts) thatif they were present, wouldproduce more effective actionthan we are producing now?”

We now have a way to interpretboth how we are producingaction and what is missing toproduce more effective action.This is the foundation forinnovating the redesign ofcoordination. When we can seebreakdowns and limitations asmissing conversations, we areimmediately oriented to beginnew action by designing orinitiating the missingconversations. CQM’s“conversational competencies”training, for example, deals withthe personal ways to listen,interpret, and speak to producemore effective action – toproduce conversations that are

more effective at producingaction.

To see how we can build morecomplex configurations ofcoordination and commitment,we’ll use a metaphor. We willregard the conversation foraction as our basic unit ofaction, an “atom” ofcoordination. Now we canobserve and, indeed, inventmore complex structures ofcoordination, “molecules” andhigher orders of coordination.Figure 2 is an example of such ahigher order of coordination.Using the “atom” of theconversation for action, the“particles” of speech acts ofassertions, judgments, anddeclarations, and another“atom” of conversation in whichwe speculate possibilities, wecan begin to distinguish, designand improve the effectiveness ofsophisticated conversationalpractices.

In the history of manydisciplines, the uncovering of aset of simple, stable recurrencessuch as these opens the door to arush of innovations. Chemistryis an example, with itsdevelopment of the table ofelements, and biochemistry withits discovery of the structure ofDNA.19 The recurrences ofstructure in language give ussuch a foundation for designand innovation. We candistinguish, for example, thefundamental structure ofconversations that produceeffective teams, planning,projects, management andstrategy; and we can innovate inour practices of performingthem.


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Designing Our Practicesand Processes IntoEffective ActionConversations

Let’s discuss further the practicesof how we can generate moreeffective actions through design.These are fundamental practicesfor innovation. One way we caninnovate in our commonpractices of action is by what wecall “reconstruction.”20 From thelinguistic structure of action wecan make new interpretations ofour standard practices andprocesses — we can reconstructthem — into the structures ofconversations, judgments, andactions that will better producetheir intended result. In fact, wecan reinterpret what the intendedresult is. For example, “teams”are a common topic in the currentdiscourse of business. What is ateam? If we look at what a teamis in terms of producingcommitments and actions, we seethat a team is a group of peoplewho have a shared commitmentto fulfill a mission to satisfy somecustomer. However, thisinterpretation does not insure thatthe team will be effective. To beeffective, we must understandwhat are the additionalconversations that produce aneffective team.

Over the last nine years mycolleagues and I have identifiedten such constitutiveconversations of effective teams.For example, team membersmust accept the invitation of ateam leader to join the team,accept the standards of the team,and participate in theconversations that generate aneffective team. Other essentialconversations include

coordinating action to satisfy thecustomer of the team andconversation to build andmaintain trust among the teammembers. Each of thesegenerative conversations can beoutlined as specific conversationsfor action and specific kinds ofjudgments.

With this kind of reconstructionwe can outline the conversationsthat generate and constitute theactions of our standard practices.We can understand and moreeffectively produce theconversations and structures ofaction that generate not onlyeffective teams, but also otherregular practices such asplanning, projects, managingpeople, strategy, designing newoffers, designing an effectiveenterprise, and so on. Thesereconstructions of practices areexecutable. You can perform theconversations, you can make therequests and promises, and youcan observe the structures ofconversation you are in andcheck to see if you are effectivein them.

This specification of thenecessary structures of action toproduce our practices is anastounding clarification forproducing effective action.Much of our language ofbusiness and management is notaction-based, but is, instead,metaphorical. What I mean bythis is that the distinctions thatare used are not executable, butare left to vague interpretation.For example, some writing aboutteams will refer to motivatingpeople. But “motivate” is neverclearly specified as a set ofactions. The text will give someexamples, but the executable

structure of motivation is nevermade clear. This leaves us with awide range of differinginterpretations of what actionsare involved, with a sense thatthis is something we are allfamiliar with, but just can’t quitemake operationally crisp — italways retains some sense ofmagic or mystery to it. Thelanguage-action approach toinnovation gives us a basis forclarifying the actions that willconstitute an effective practice,for example a team, and thenclarify the conversations andconversational skills that areneeded by people to producethose actions.

Self-Generating NewCompetitive Capabilities

Once we see that we can designnew actions and theconversations that generate them,and by doing so improve evenour standard practices of action,we will encounter the issues ofhow to get these new practicesadopted, integrated, and effectivein an organization. We have tobe able to successfully deploynew, effective practices in anorganization to be able toproduce new competitivecapabilities. Innovation withoutthe structure and practices tomove them into becoming newcompetitive capabilities is wasteand lost opportunity. ManyJapanese companies, forexample, don’t just focus onproducing new patents, but havea process for reviewingAmerican patents and buyingrights to those that are relevant totheir competitive developments. The process of managinginnovation into competitivecapability has its own


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fundamental ordered language-action structure. This structureincludes shifting the capabilitiesof a company’s people tocoordinate and to reinvent theirstructures of coordination.Attempts to shift competitivecapabilities often fail when thisstructure is not included in thedesign and implementation. Todevelop new competitivecapabilities requires: thecommitment of those who candirect the organization and itsresources as well as the membersof the organization; a cleardesign of actions for innovation;and the competencies to carry outthe actions. In our work we havedeveloped an interpretation ofthe essential structure fordeveloping new competitivecapabilities that includes thefollowing elements:

l Shift the common sense to amore effective framework foraction - the language-actionapproach,

l Design more effectivepractices and processes asstructures of action,

l Produce embodied learningand competence in newpractices,

l Declare the responsibilities fornew practices and processes,

l Get commitments for theirresults, and

l Produce new results as amanaged commitment.

We have already addressed theintroduction of the language-action approach. Then we can

design more effective practicesand processes, which we’ll saymore about in a moment.Embodied learning andcompetence refers to thenecessity that we must not onlyunderstand, but be able toperform in action — embody —the new practices and processes.The educational practices of ourculture are oriented to produceunderstanding, but are weak inproducing embodiedcompetence. Practices forproducing embodied competenceare an important area ofinnovation in itself. Mycolleagues and I have donesubstantial development of newpractices for developingembodied learning andcompetence based on the work ofDr. Richard Heckler, and theinsights of George Leonard andothers.21 We will present thismore fully in a futurepublication.

The last three points-to declareresponsibilities, getcommitments, and to manage thecommitments-are crucial butoften are not done well. Thereason given is often being busy“with the real work,” or becauseaccountability is left to someoneoutside the organization. To usethe language of the conversationfor action, we don’t have eitheran effective customer or aneffective performer. We musthave clear accountability forinnovation, and for makinginnovation into competitivecapability. The future must havea priority in the present, or it willbe a product of drift, not design.

This structure of organizing toproduce and deploy innovationsin work is shown by the

following example. In thisexample a company’s businessperformance was improved frominitial attention on redesigningprocesses to an ongoing redesignof management practice. Herethe reconstruction of standardpractices and deploying them toproduce new competitivecapabilities was carried out.

Example of DevelopingManagement Practices atKnowledge TransferInternational

Knowledge TransferInternational, Inc. (KTI) is a NewYork City-based company thatprovides services indocumentation, training,knowledge management, andsupplementary staffing. Theyprovide ready-made teams toassist in the design and roll-outof new systems and thedocumentation andimplementation of newprocesses. KTI is a smallcompany, with revenues oftwelve million dollars a year, butis a good example of a commonexperience with companiesundergoing change initiatives –the changes show the need forand eventually require a shift inmanagement practice andcapability. The language-actionapproach has proven to beparticularly well suited to designeffective management practicessince it is based on thecustomer-performer actionstructure. Managers arecustomers for requests that willproduce satisfaction for theirteam’s customers.

The initial project at KTI, a“reengineering effort” (wethought of it as a redesign of


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coordination) was contractedwith Kairos, Inc., in 1994. Atthat time KTI was an eightmillion dollar a year company,and the management teamrequested a redesign of theirbusiness processes because theywere concerned that they wouldnot be able to take the companybeyond this revenue level,having failed to do so in priorattempts in their thirteen-yearhistory. An intense effort wasmounted over a five-monthperiod to reorient the company,particularly the managementteam and the sales staff, tocoordinating action andproducing customer satisfactionfor both internal and externalcustomers. Coordination wasimproved in the managementteam and new processesaddressed interdepartmentalwaste and supported sales.Commitment-based email wasalso installed.22

The result of this effort was thatsales rose by 25% in thefollowing twelve-month period.However, increasingly we foundthat the practices of themanagement team were theopportunity to leverage theperformance of the company.The company had been aclassical entrepreneurial startupby the owners, and themanagement team had a historyof being top producers in thesales-oriented firm, not of beingmanagers. The approach oforganizing around promises,customers, and performers gavethe management team aframework for producingorganized action. Themanagement team went frombeing unable to mount newprojects or have productive

meetings to producing moreeffective conversations andactions.

The company also developed anaction-based interpretation ofknowledge that is orientingdevelopment of new offers inKnowledge Management. Afterreviewing the ambitions of thecompany partners and themanagement team’s skills a newstrategy was developed, nowunderway, to bring in new keyexecutives and develop a plan tosignificantly grow the companyin the next several years. Theowners have taken roles in thecompany that are not in day-to-day operations, and have beendeveloping their skills ascustomers and leaders forgrowing the business.

The highlights of this exampleare the shift in the managementpractices, the shift of the roles ofthe central players of thecompany, and the reinvention ofthe game of the business whilesustaining growth. This wasmade possible by the partnersand managers learning to havenew conversations of design andcoordinating action, of designingroles, and of developing strategy.They are developing theirpractices for innovation ofaction, innovation of practices,and innovation of the strategyand game of the business.

Innovation As Action andPractice

With what we have discussed sofar, we can now come back toinnovation itself and say moreabout the practices ofinnovation. Since we havedistinguished types of innovation

and shown that practices forinnovation can be constructed inlinguistic recurrences, we’ll nowsay more about these recurrencesand how to develop them intoexecutable practices. We wantto see what the kinds ofconversations are: the kinds ofmoves we make in thinking andlanguage that generateinnovation.

As an update to our articulationof innovation in the beginning ofthe paper, we can now say:

Innovation in business isproducing new value forcustomers, by engaging inpractices that bring one to makerequests, promises, and offers ofnew action.

Competitive innovation is thegeneration of new value forcustomers that leads them toaccept your offers rather thanthose of your competitors.

The new value produced ininnovation has to becompetitive value— it mustproduce in customers thejudgment that the new value youproduce is at least equal to orbetter than offers fromcompetitors. Competition in themarketplace is the competitionto provoke the judgments incustomers that you haveproduced an edge in comparativevalue.

The Practices for Self-Generated Innovation

The practices of innovation arethen practices for seeing newpossibilities for satisfaction andvalue and then for producing


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effective action — conversationsfor action — to realize thesepossibilities. We have nowarticulated innovation aspractices that lead to newoffers.23 In summary, thepractices we have introducedthat lead to new offers include:

l Identifying waste andeliminating it,

l Seeing the value of marginalpractices and bringing them tothe center of standardpractice,

l Designing the fundamentalgenerative linguistic structureof specific kinds of action,

l Listening to the concerns,standards of value, andshifting standards of value ofcustomers,

l Shifting standard practicesand processes, shiftingstrategies and games, andshifting the common sense inwhich we interpret futurepossibilities and action.

All of these practices are builtaround listening for new value,designing new actions toproduce the value, andgenerating the competence andcommitment to fulfill conditionsof satisfaction of the actions. Inour approach, the essentialelements of an effective practicefor innovation must includeproducing new offers to somecategory of customers, listeningfor their judgments, interpretingtheir future standards of value,taking actions to produce newoffers and their value, and acting

to generate commitment to thenew offers from both customersand the offering organization.

To produce an organization thatis producing innovation, self-generated innovation, means thatwe must establish permanentrecurrent practices to increasethe value of the actions of theorganization. This meansshifting an organizational culturefrom an operational style of“getting the work done today,”to produce the margin forcontinuous conversations of“how do we increase the valueof what we are doing.” This isnot only continuousimprovement in the tradition ofthe quality movement, aimed atdoing what we are already doingbetter, but also includes practicesfor more radical innovation.

The kinds of practices we havediscussed are elements forbuilding a pervasive network ofpractices for innovation. Thebasic unifying foundation forthis network of innovationpractices is the language-actionapproach, taking action toproduce customer satisfaction.The following table is a general,orienting summary of theconversations and practices in acompany, and who isaccountable for them, that willproduce self-generatedcompetitive innovation.

Since innovation is the inventionof new possibilities and value bypeople, the practices forinnovation must be centeredaround building new capabilitiesin people. This means newcompetencies in conversations,the conversations that generate

possibility and action.

By saying that these practicescan be self-generated we aresaying innovation can beproduced intentionally, throughpractices for innovation – nothaphazardly or by luck. Therewill always be the occurrence ofunforeseen and unexpectedinsight, and of invention. Butwhat we are after is to establishthe criteria for a garden in whichinnovation can be cultivated andregularly harvested.

To summarize our claims aboutproducing self-generatinginnovation practices: 1)Innovation is producing newconditions of satisfaction foractions and new value in thejudgment of customers, 2) thecapability to innovate is built onconversational and linguisticcompetencies, 3) design ofinnovation conversations and thedevelopment of competency inthem will increase the value ofthe results achieved, 4)innovation conversations can bestrengthened and made moreproductive by establishingregular practices for them, 5)there must be a customer for theinnovation practices and theirresults, and 6) there must be acommitment to the practicesand accountability for theresults.

A basic move in shifting ourcapability for innovation is tosee that action and humancoordination is produced inlanguage, and innovationarises in linguistic andconversational practices.24 Toproduce something new ofvalue, to innovate, we mustproduce new language, a


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language of new conditions ofsatisfaction. In the language-action approach we can see howour language generates newaction and value, instead of justbeing a describer of it afterwards.This is why the approach is apowerful perspective forproducing competitive change inbusiness, and cultural change inorganizations. Other approachesmay not explicitly distinguish theshifting language, common sense,and practices implicit inorganizational change, but stillmust produce it.

Our key claim here is thatinnovation is constituted bytaking action in language:producing new interpretationsand new conversations thatproduce value through generating

new actions and practices. To dothis we must first shift ourcommon sense in order toproduce an awareness of howaction and value are generated inlanguage. Then we can developin our organizations a culture ofself-generated competitiveinnovation if we can developcompetencies and standardpractices for listening for thevalue we produce and don’tproduce, for inventing newpossibilities, and for taking actionto realize these possibilities.

Conclusion

Over the last eight years thelanguage-action approach hasbeen producing significantbenefits in companies. Theapproach has the advantage of

making observable a dimensionof human action that waspreviously not explicit — therelationship between languageand action. This new perspectiveprovides a whole new source ofopportunities for innovation,reducing waste, and increasingcustomer satisfaction. Theapproach is not just a newtechnique, but is built on afoundation that provides a newexecutable framework for designand innovation. This foundationfor design is a fresh opening forproducing competitive advantage.As we have discussed in thispaper, it is making possible thedesign of and practices for self-generated competitiveinnovation.

TABLE 1: Table of Innovation Practices


66 FALL 1997 VOL. 6 NO. 2

Bibliography

Capra, Fritjof, The Web of Life, (New York: Anchor Books), 1996.Dreyfus, Hubert L., and Stuart E. Dreyfus, Mind over Machine, (New York: The Free Press), 1986.Dunham, Robert, “Business Design Technology: Software Development for Customer Satisfaction,”Proceedings of the IEEE Annual Hawaii International Conference on System Sciences, 1991.Dunham, Robert, “Notes on the Strategy Conversation,” 1996.Echeverria, Rafael, Ontologia del Lenguaje, (Santiago: Dolmen Ediciones), 1994.Flores, Carlos F., “Management and Communication in the Office of the Future,” Ph.D. diss., University ofCalifornia at Berkeley, 1982.Flores, Fernando, “The Leaders of the Future,” in Beyond Calculation, edited by Peter J. Denning andRobert W. Metcalfe (New York: Copernicus), 1997, pp. 175-192.Hamel Gary, and C.K. Prahalad, Competing for the Future, (Boston: Harvard Business School Press), 1994.Heckler, Richard, The Anatomy of Change, (Berkeley: North Atlantic Books), 1984, 1993.Leonard, George, Mastery, (New York: Penguin Books), 1991.Maturana, Humberto, and Francisco Varela, The Tree of Knowledge, (Boston: ShambhalaPublications), 1987.Searle, John R., Speech Acts, (London: Cambridge University Press), 1969.Spinosa, Charles, Fernando Flores, Hubert L. Dreyfus, Disclosing New Worlds, (Cambridge: The MITPress), 1997.Varela, Francisco, Evan Thompson, and Eleanor Rosch, The Embodied Mind, (Cambridge: The MIT Press),1991.Walden, David, “Designing Effective and Efficient Action,” internal paper of the CQM StudyGroup on Conversation, 1997, available from the CQM.Winograd, Terry and Fernando Flores, Understanding Computers and Cognition, (New York: Addison-Wesley), 1991.

Notes

1This metaphor of the highway of business is from Hamel and Prahalad, Competing for the Future, p.28.2These examples are from Hamel and Prahalad, Competing for the Future.3Walden, David, “Designing Effective and Efficient Action,” internal paper of the CQM Study Group onConversation, available from the CQM.4TQM’s focus on continuous improvement and its Hoshin Management approach are examples. Note theshift by Michael Hammer and James Champy from the themes of Reengineering the Corporationtoaddressing the people issues as fundamental in their more recent books of Reengineering Management(Champy) and Beyond Reengineering(Hammer).5Walden, David, ibid.6See Maturana and Varela, The Tree of Knowledge.7See Winograd and Flores, Understanding Computers and Cognition.8Flores and his colleagues have a more precise distinction for this called shifting a “disclosive space,”where a disclosive space is a “self-contained web of meanings,” including roles, equipment, and how wecoordinate in this set of meanings. For example, chemistry is a disclosive space. See Disclosing NewWorlds.9See Disclosing New Worlds, by Spinosa, Flores, and Dreyfus, MIT Press, 1997.10Flores developed this approach in his work and workshops in the 1980’s.


VOL. 6 NO. 2 FALL 1997 67

11See also “Employing Groupware in Business Process Redesign: Action Technology’s ActionWorkflow,”Richard M. Kesner, Center for Quality of Management Journal, Vol. 5, No. 2, Fall 1996, and“Reengineering in Health Care: Chain Hand-Offs and the Four-Phase Work Cycle,” Edward Chaplin,Quality Progress, October 1996.12See Winograd and Flores, Understanding Computers and Cognition.13This four-phase loop representation of the conversation for action is a copyrighted invention of ActionTechnologies, Inc.14Graphic of the ActionWorkflow from Flores, Fernando, “The Leaders of the Future” in BeyondCalculation, edited by Peter J. Denning and Robert M. Metcalfe (New York: Copernicus), 1997, pp. 175-176.15We sometimes use the term “Business Process” to indicate the coordination that happens through theconversation for action, even though this is a different usage of the term than is generally used, to indicatethat it is the foundation of the processes between customers and performers (or providers). 16We have found that coordination processes carried out by machines are also subject to the structure of theActionWorkflow in that it is designed to keep two or more parties up to date on the progress of action tocompletion and satisfaction. 17From Flores’s Ph.D. thesis, “Management and Communication in the Office of the Future.”18Graphic of the business process map from Flores, Fernando, “The Leaders of the Future,” in BeyondCalculation, edited by Peter J. Denning and Robert M. Metcalfe (New York: Copernicus), 1997, pp. 175-176.19From Flores, Fernando, ibid.20Flores developed a comprehensive approach called “Ontological Reconstruction.” Here we are doing amore limited type of reconstruction which we can call “Conversational Reconstruction.” 21See Richard Heckler’s The Anatomy of Change, George Leonard’s Mastery, Varela, et al., The EmbodiedMind, and Maturana and Varela, The Tree of Knowledge.22Flores, Fernando, Michael Graves, Bradley Hartfield, and Terry Winograd. “Computer Systems and theDesign of Organizational Interaction,” ACM Transactions on Office Information Systems6:2 (April 1988),pp. 153-172.23Flores has developed a body of work around innovation and the practices for producing it. Also see TonySchwartz and his discussions of creativity in his book What Really Matters.24Flores clarified this application of speech act theory in the 1980’s, which is discussed in Winograd andFlores, Understanding Computers and Cognition, and in Flores’s Ph.D. thesis, “Management andCommunication in the Office of the Future,” unpublished, and in numerous papers in his companies.

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