Indian business has been protected from aggressive competition for over four decades. Consequently, quality is featured way down on the priority list of companies. But with liberalization, the scenario is changing rapidly. Competition has become a reality for most business enterprises.
Competitors seldom stand still. They continuously move forward to gain market share. To keep up or move ahead, management must continuously improve products and services, not seek government protection. Mega corporations in India cannot bask in their past glory, nor expect the government to reverse its refreshing new policy.
Two themes of primary importance to Indian competitiveness have been developed by the Juran Institute and Qimpro Consultants. The first theme: management should focus on creating and delivering the best net value to the customer, not maximizing return on investment or shareholder equity. Net value means the difference between what the customer receives (a product or service) and what the customer sacrifices (money and time). "Best" refers to the customer’s perception of net value.
Three critical dimensions of customer value are quality, cost and response or delivery time. Focusing on these issues is not often the behaviour of choice for Indian managers, trained to concentrate almost solely on financial performance. However, there are winds of change in organizations such as Mukand, Voltas, Greaves Cotton and Godrej & Boyce.
The second major theme: managers must design and continuously improve organizational alliances and consensus thinking that cut horizontally across vertical organization structures; integrate corporate functions such as engineering, manufacturing, and finance; and foster team work. This collection of resources and activities, called strategic suprasystems, is crucial to producing and delivering customer value.
We need to learn a lesson from American and European firms that lost sight of these twin issues and consequently lost dramatic market shares to Far Eastern competitors. How did the West ever get into the bind of thinking that the unitary purpose of firms is short-term maximization of shareholder wealth? Does the customer, who votes with his or her money, care about shareholders?
However, many firms now agree that delivering the best net customer value is the goal of management. John Pepper, president of Procter and Gamble, has said, “No factor has been more significant to P&G’s improved financial performance than the application of total quality principles to more and more of what we do".
At P&G, the commitment to total quality systems has sharpened it’s focus on quality improvement and has reduced complexity, rework, and costs in everything it does. It led P&G to rethink how well it really understands customer needs; to add research and measurement techniques that go well beyond traditional methods.
Improved results
Together, these improvements mean delivery of superior quality value, and satisfaction to the world’s consumer. One measure of that satisfaction is P&G’s leadership in market share in many categories from household products to personal health care products. These improvements also contribute to improved results for shareholders. P&G initiated total quality in the mid-eighties, and profit results have improved sharply; they are up 20 per cent per year during the past three years. That’s almost three times the annual profit increase during the past seven years of the decade 1981-91.
Category 7 of the Malcolm Baldrige Award criteria is what Total Quality Management is all about: customer satisfaction. Customer satisfaction can be defined as the degree of happiness a customer experiences with a company’s product or service, which results from the interaction and interrelationships of all people within that company. Category 7 carries more points than any other category - a total of 300 points out of a possible 1,000. Indian companies should note that customer satisfaction is not the result of chance but determined action. It is built around certain core values.
Customer driven quality. This means that the acceptable level of product or service quality is determined by the customer not the provider.
Leadership. A company must be a leader in its market. Leadership is demonstrated by, first, competitive benchmarking. Successful organizations compare themselves with industry leaders in many customer related areas, such as cycle time and complaints. Leadership is also demonstrated by market share of each product in each market segment; conversely, closed accounts and lost business indicate leadership is lacking. Finally, leadership can be shown by creating new products and services.
Full participation. All employees must work together so its product meets customer requirements. This relationship extends throughout a product’s life cycle, from initial design to prototype testing to delivery.
Fast response. Responsiveness enables a company to command a premium price for its products. One way to exceed customers’ expectation: same-day shipment.
Management by fact. Customer relationship management must be based on facts. It is not enough to say that customers are satisfied because they are still purchasing a product or service, or because the company has not received any complaints. Objective data on customer satisfaction must be obtained from published surveys, third-party consultation, and customer satisfaction surveys. If a company asks the right questions, it will get the right answers.
Long range outlook. Successful companies innovate - they anticipate changing, increasingly challenging customer needs and expectations. Companies that are not innovative risk evaporation.
CREDITS: Suresh Lulla, Founder & Mentor, Qimpro Consultants Pvt. Ltd.