products, business and quality issues
TRANSCRIPT
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Products, Businessand Quality Issues
Dr Gaetano D'Emma, CSBIPresented at the Department of Electronics,
Computer Science and Systems,University of Bologna on November 26, 2004
Purpose
How could or should a young engineer move himself within today's business world ?Explain the different quality approaches.Use the product development as an illustration.Management issues based on personal experience.
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Topics of Discussion
I. Personal backgroundII. Usual business approach and quality issuesIII.New business model and total quality management
I - Personal Background
Consultant since 2001Industry, 1981- 2000– Project Manager– Product Manager– Service Marketing Manager– Customer Value Manager
University, 1969-1981– Physics, MSc– Theoretical Physics, PhD– Applied Optics
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Academic Experience 1969-1981
Physics, Université de Genève, Switzerland– Student, MSc, 1974– Assistant, Theoretical Physics– PhD, 1979
Applied Optics, France– Assistant professor, Université de Franche-Comté,
Besançon, France– Invited professor, Ecole Supérieure d’Optique,
Université de Paris XI, Orsay, France
Industrial Experience 1981-2000
Landis & Gyr, Headquarters, Switzerland– Project Manager, Mathematics & System Theory– Product Manager, Building Automation– Service Marketing Manager, Landis & Gyr Italia, Milano– Service Marketing Manager, Building Automation
Siemens Building Technologies, – HVAC Products,Customer Value Manager
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II - Usual Business Approachand Quality Issues
Marketing-Mix
Product– Name, functions, quality, styling, packaging, size, warranty
Placement– Distribution channels, logistics, warehouses, stores
Promotion– Targets, publicity, communication means
Price– List, discount policy, payments, credit
Four P's, McCarthy, 1978
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Marketing Management
Analysis– Market– Competition– Market Needs Identified
Product– Specifications– Product Design and Development– Manufacturing
Sales– Distribution channels– Promotion– Post-sale service
Quality - Definitions
The standard of something as measured against other things of a similar kind.The degree of excellence of something.A high level, an usually good characteristic, a special feature.How good or bad something is.There is a subjective appreciation !
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Subjective Appreciation
Perception:the ability to see, hear, or become aware something through the senses.Expectation:a strong belief that something will happen or be the case in the future.
Perception vs. Expectation
A product or a service can be of the highest quality if it
meets the expectations of its consumers, given the price
range and intended use.
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Example : An Airline Seat
A First Class seat on a regular flight does not offer better quality than an Economy Class seat on a charter flight.Each is offering a different service to a different type of customer.
How to Measure Quality ?
It can be measured by the extent to which the flight meets customer expectations :
– Price– Check-in facilities– Departure time– Size of seat– Food and beverages– Flight attendants service– Time-keeping– Etc.
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Setting Standard
Is 98% too high ?100 independent manufacturing steps results in a final product with 13,2% accuracy (= 0,98100).Drinking water would result unsafe 8 days per year.10 words would be misspelled on a page containing 500 words.
Quality Control
Inspection of goods and services to make sure that what is being produced is meeting all expectations.Statistical Quality Control :System of maintaining standards in manufactured products by testing a sample of the output against specification at the end of the manufacturing process.But …
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Late
Statistical Quality Control happens at the end of the manufacturing process.It is too late !Why ?Because it results in defective products received however by customers.
Expensive
Statistical Quality Control results in tangiblecosts :– materials,– labour hours,– delayed deliveries, etc.
And in intangible costs :– customer dissatisfaction,– employee dissatisfaction,– lost customers,– lost sales, etc.
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Quality Control
What to Improve ?Consider the different processes in an operation.Inspect the processes, not only the final product.
How to Improve ?Where mistakes are being made ?Why mistakes are being made ?How to avoid recurring mistakes ?
Process
A sequence of activities that achieves a business result or a key "outcome".Processes correspond to natural business activities, but are often buried in organisational structures.
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Where Do We Find Processes ?
Major processes typically cross organisational
boundaries to complete the desired business outcome.
Business Process
Market – Analysis– Competition– Requirements identified
Product– Specifications– Product design and development– Testing– Manufacturing
Sales– Distribution channels– Promotion– Pre-sales and post-sales services
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How to Improve Processes ?
Establish cross-functional teams.Identify and describe the processes.Measure and analyse the processes.Focus on the "what" and "how", not "who" and "where".
Total Quality Control (TQC)
Inspection of processesPreventative actionsMeasure and analyse failures
Use a TQC system :Management system in which all employees in alldepartments improve quality and procedures to give customers products and services which are– most economical,– useful and– of best quality.
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Example: Electronics Industry
80'sOwn production of electronic componentsSuppliers deliver raw material.Procurement contractQuality of finished goods
TodayOutsourcing to third companiesSuppliers deliver added-value components.Partner contractTotal quality of processes
Link with Product Development
Manufacturethe
product
Delivertheproduct
Selltheproduct
Createnewproduct
Identifya newneed
Marketing R&D Operation Logistics Sales
Supplier
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Link with Product Development
Manufacturethe
product
Delivertheproduct
Selltheproduct
Createnewproduct
Identifya newneed
Marketing R&D Operation Logistics Sales
Partner
Total Quality Control
Implement a supplier management system.Keep the Statistical Quality Control at the end of manufacturing process.
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Supplier Management
Measure the suppliers through key indicators !Categories :– Sales– Quality of the delivered components– Logistics– Technology
Criteria :– Performance– Service– Support– Co-operation– Environment
Paradigm Shift
Suppliers of components with added-value become part of the business chain.Suppliers deliver more than a product, they deliver a service:– involvement in design phase of final product– order process– delivery in-time and accurate– invoice process
The quality of the whole process is relevant, not only the quality of the delivered components.
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Paradigm Shift
Cultural change: From product to service.Service is produced and consumed at customer site.The value is perceived and determined by the customer.Service is delivered by people.
Service : A Definition
A service is a series of activities that normally take place
in interactions between the customer and employees,
physical resources, goods and systems, and which are
provided as answers to customers' needs.
C. Grönroos, Service Management and Marketing (1990)
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Computer Industry in the 80-90's
MainframesMini-computersWorkstationsLocal area networksNotebooksPalm computersMobile phones
Proprietary systemsSpecific developmentStandard applicationsClient-server technologyData exchangeRemote accessSMS, MMS, video, etc.
Where is the paradigm shift ?
80's
90's
Paradigm Shift in the Computer Industry
Early 80's - Maintenance contract for the hardware
–Check–Backup–Clean the computer–Spare parts–Emergencies
Post-salesOwn people
Today - Service contract for the whole IT solution
–Audit–Consulting–Implementation–Training of users–Yearly upgrades included
Added-valueOutsourcing
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III - New Business Model andTotal Quality Management
Time taken for a technology innovation to be adopted by 10 million users
Pager 41 yearsFax machine 22 yearsCellular phones 9 yearsCompact disks 7 yearsPersonal computers 6 yearsBrowser 0.83 year (10 months)
Technology Adoption
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Importance of Information
Rapid business changes request to adequate the information technology infrastructure in record time.New telecommunications capability are necessary to conduct complex business operations across geographically distributed locations.Information sharing is the means to reach business results.
From Industrial to Information Age
Industrial AgeFactors of production: land, labour and capitalCentralisationPyramid power structureMainframesStandardisationMass productionBased on muscle
Information AgePrimary resource is knowledgeDecentralisationDelegation of authorityNetworksIndividuationMass personalisationBased on mind
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Usual business approach is dead !Why ?Actual business world requests new business models.
New Environment
New Business Models
Industrial Age Information Age
Competition ProductsServices
Business Processes
Control Producer Customer
Barriers Financial capital Intellectual capital
Pricing Local Global, real-time
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How to Create a New Model ?
Transform the marketing-mix (four P's) :– Product– Promotion– Placement– Price
Add Customer Relationships.
Transform the Marketing-Mix
ProductName, functions, quality, styling, packaging, size, warrantyAvailability of product related information on-line
PlacementDistribution channels, logistics, warehouses, storesOn-line order processing, secured on-line payment
PromotionTargets, publicity, communication meansUse of on-line advertising, links with other organisations
PriceList, discount policy, payments, creditCustomisation of prices on-line, on-line negotiation
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Add Customer Relationships
Provide on-line customer service.Identify and track customers to provided customised services.Create on-line forums for customers.Enable on-line feedback from customers.
Focus on Customers
CustomerSatisfied ? Y ⇒ Retention
N ⇒ Risks
Customer Value Management
BuildProducts andServices
DeliverProducts andServices
Service theCustomer
CreateNewOfferings
CustomerNeedIdentified
Innovation Process Operations Process Post-sale Process
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Managing Risk
Any organisation faces an array of security, safety and other potential loss exposures. Managers need to understand these threats and the options available to counter them.This provides a basis for deciding which protective measures and expenditures are justified in relation to the risks identified.It increases the added-value as perceived by the customers.
Satisfaction vs. Value
Customer Satisfaction Approach– Focus on how to satisfy people who are using our products
and our services.Customer Value Approach– Focus on how people choose among competing suppliers.
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Customer Value Questions
What are the key buying factors for a customer when he chooses among our competitors ?How does a customer rate our performances vs. competitors on each key buying factor ?
Total Quality Management (TQM)
Total Quality Management integrates quality control and total quality control further completely into an organisation.
Total Quality Management focuses on: – Customer satisfaction– Continuous improvement– Employee involvement– Results orientation
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TQM – Customer Satisfaction
Consider both current and future customer needs.
Develop new products and services that customers might not think of on their own, but which they would respond positively to.
Exceed customers' expectations !
TQM – Continuous Improvement
All processes are constantly under examination.
Everyone in the company is committed to the concept of continuous improvement.
Do right 1st time, improve 2nd time !
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TQM – On-going
Focus on the critical issues.Improve in closing identified gaps.Implement the solution.Evaluate again.Start again the whole cycle.
TQM – Involvement
Everyone in an organisation must be committed.Achieving this commitment is not easy and takes a long time.Organisations need strong leadership and commitment from the top.
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How to achieve TQM ?
Recognise that improvement of processes must be on-going.Improve customer satisfaction.Measure both customer and employees feedback.Implement a Quality Management System !
ISO 9000 Standards
Created by the International Organisation for Standardisation (ISO) in Geneva, adopted by countries in 1987.
Based on the standardised quality assurance system BS5750 created by the British Standards Institute (BSI) in 1979.
New revisions since December 2000.
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The New ISO 9000 Standards
ISO 9000:2000QMS – Fundamentals and vocabularyISO 9001:2000QMS – RequirementsISO 9004:2000QMS – Guidance for performance improvement
QMS: Quality Management Systems
ISO 9000 – Benefits
The new ISO 9000 standards takes into account business and process improvement, as well as customer satisfaction.An ISO 9000 certificate is proof that customer requirements have been taken into account.ISO 9000 helps to guarantee day-to-day quality.
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Quality Management Principles
1. Customer focus2. Leadership3. People involvement4. Process approach5. System approach to management6. Continual improvement7. Factual approach to decision making8. Mutually beneficial supplier relationship
ISO 9000 – Limits
The ISO 9000 standards were never designed as key success factors for building an industry leader.The ISO 9000 standards ignore critical indicators such as business results and issues concerning people and society.
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European Foundation for Quality Management
In 1989 14 European leading organisations decided to join their effort to develop a holistic management framework.Vision: A world in which organisations in Europe excel.Mission: To be the driving force for sustainable excellence in organisations in Europe.
14 Leading Organisations
BT plcRobert Bosch GmbHBull SACiba-Geigy AGDassault AviationElectrolux ABFiat Auto SpA
KLM Royal Dutch AirlinesNestlé SAPhilips Electronics NVIng. C. Olivetti & C. SpARenaultGebr. Sulzer AGVolkswagen AG
Founded in 1989 by 14 leading European organisations
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Business Excellence Model
Holistic management framework means :A framework to make sense of the vast range of initiatives we all have.A set of organisational beliefs or values.A basis for thinking about, discussing and improving our organisation.A framework for analysing an organisation and benchmarking with others.A basis for a management system.
Eight Fundamental Concepts
1. Customer focus2. Partnership development3. People development and involvement4. Management by processes and facts5. Continuous learning, innovation and improvement6. Leadership and constancy of purpose7. Corporate social responsibility8. Results orientation
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The European Foundation for Quality Managementis a not-for-profit membership foundation,
is the creator of the EFQM Excellence Model,manages the European Quality Awards, andis a resource to European organisations on business and continuous improvement disciplines, tools and techniques.
1. Customer focus2. Partnership Development3. People development and
involvement4. Management by processes
and facts5. Continuous learning,
innovation and improvement 6. Leadership and constancy
of purpose 7. Corporate social
responsibility8. Results orientation
1. Customer focus2. Leadership3. Involvement of people4. Process approach5. System approach to
management6. Continual improvement7. Factual approach to
decision making8. Mutually beneficial supplier
relationship
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Conclusion
Key Buying Factors
Besides product issues :Speed of response to inquiryOrder processing and accuracyDelivery cycle, on-time, damage-freeOrder receipt and follow-upInvoice accuracyRepairs processLevel of complaints
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Quality Issues
Different quality approaches :– Definition of quality– Statistical Quality Control: Limits– Total Quality Control: Consider processes
Use the product development as an illustration :– Product Development: Business sub-process– Suppliers: Business partners– Services: Focus on customers
Conclude with Total Quality Management :– Customer satisfaction– On-going improvement– ISO 9000:2000 and
Virtuous Circle
Customer more loyal leading in turn tohigher profits and more satisfied employees,who serve customers better.
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Adaptability is Critical
-- Charles Darwin
It is not the strongest of the species that survives, nor the
most intelligent; it is the one that is most adaptable to
change.
References
Strategy Maps, Robert S. Kaplan and David P. Norton, Harvard Business School Press, Boston, 2004
The Balanced Scorecard, Robert S. Kaplan and David P. Norton, Harvard Business School Press, Boston, 1996Introduzione al Marketing, Anna Claudia e Giorgio Pellicelli,Sperling & Kupfer Editori SpA, 1993, II Edizione
Sette Strumenti Manageriali della Qualità Totale,Alberto Galgano, Il Sole 24 Ore, 1999 http://www.galganogroup.it
International Standard Organization ISO, Geneva, http://www.iso.org
European Foundation for Quality Management, EFQM, Bruxelles, http://www.efqm.org