Indian businesses that do not produce high-quality products and services will not survive the balance of this decade. Consumers are becoming sophisticated. Thanks primarily to satellite television, today’s shoppers are cognizant that foreign products and services are sometimes equal, but mostly better, than those made in India.
Over the years, the primary concern of most Indian businesses had been financial vitality in the short-term. Short-term thinking precluded long-term results as we mortgaged the future for the present. Businesses were preoccupied with efficiency over effectiveness, with price over value, and with economies of scale. Businesses now feel threatened by world-class players. Consequently, a recurring question in our society is "How do you become more competitive?" As a response, I wish to borrow the thoughts of Robert W Galvin, Chairman of the Executive Committee, Motorola Inc and Chairman of the Board of Overseers, Malcolm Baldrige National Quality Award (1989-1991). According to him, a good surrogate question is "What are you doing about quality?".
As foreign competition now challenges the Indian economy, survival is the impetus for quality. Improved quality of goods and services can enhance productivity, lower costs, improve salability and increase profitability. Quality must be integrated into the business strategy. But then, how do you know that your quality efforts have been financially worthwhile? Have they improved your competitiveness?
DEMING PRIZE
Well, the Japanese had a novel idea back in 1951, when the quality of their offerings was equated with the standard for bad quality. They published the criteria for the Deming Prize which was developed to recognize excellent Japanese companies. The Japanese successfully used the Deming Prize criteria to drive up the quality of their companies. Over the years, the Union of Japanese Scientists and Engineers (JUSE) perceived the benefits of the Deming Prize in two categories:
- Tangible: Increased market share, increased production volume, successful development of new products, fewer complaints, reduced defect costs, fewer industrial accidents, etc
- Intangible: Increased consciousness of quality and problems, better communication horizontally and vertically, improved human relations, improved information feedback, etc.
These are surely the benefits we want from adopting quality, company-wide. The main elements for the Deming Prize are:
- Company policy and planning
- Organization and its management
- Education and dissemination
- Collection, dissemination and use of information of quality
- Analysis
- Standardization
- Control
- Quality assurance
- Results
- Future plans.
Japanese quality caught up with that of the West in the 1970s, as sharply improved Japanese products flooded the American marketplace. By the late 1970s, Japanese electronics and autos had gained major US market shares. These high-quality yet affordable products drew attention. Incredulous executives from such American companies as Xerox and Motorola toured Japanese plants and discovered defect levels 500 to 1000 times better than those in comparable US facilities. Brand names such as Nikon, Sony, Seiko, and Honda had achieved the status of the German cameras and Swiss watches of an earlier era.
BALDRIGE AWARD
The origin of what is now the Malcolm Baldrige National Quality Award can be traced to a series of events that began in the early 1980s in the US. Various groups of industry and government leaders began looking in earnest at the seriousness of America’s declining position in the global marketplace. As competitive pressure grew in the mid-1980s, so too did the interest in a national productivity and quality award.
On August 20, 1987, the President signed Public Law 100-107, Malcolm Baldrige National Quality Improvement Act. This law established the Malcolm Baldrige National Quality Award, named after a former Secretary of Commerce, the late Malcolm Baldrige. The award is designed to recognize companies that have successfully implemented Total Quality Management (TQM) systems.
On close scrutiny, we can see the Deming Prize principles reflected in the Baldrige Award. However, there is very strong emphasis on customers. The main elements of the Baldrige Award are:
- Leadership
- Information and analysis
- Strategic quality planning
- Human resources development and management
- Management of process quality
- Quality and operational results
- Customer focus and satisfaction.
Dr J M Juran, Chairman Emeritus, Juran Institute Inc., was asked at a recent conference how commercially successful have Baldrige winners been. He was unable to judge at the time but was willing to bet that they were successful. Subsequent research revealed the extent of their success:
"If you had invested money in each Baldrige winner on the day their award was announced, you would have achieved a 89.2% gain on investment. An equivalent investment in Standard and Poor’s 500 stock index on the same dates would have yielded 33.1% gain."
EUROPEAN AWARD
As the European Community (EC) evolved, so did support for quality standards. The goal of the EC was to function as a single market by December 31, 1992. The challenge was to develop "Euronorms" to provide uniform standards from the existing conglomeration of quality certification and specification systems of 12 member states covering 350 million people.
The International Organization for Standardization (ISO) in 1987 published the ISO 9000 series of quality system standards. These have gained wide acceptance in Europe and several other parts of the world. The ISO series of standards - ISO 9000, 9001, 9002, 9003 and 9004 - are guidelines for the design and development, production, final inspection and testing, installation, and servicing of products, processes, or services. ISO standards require a company to have documentation of its quality systems and go through a registration process that consists of an extensive third party audit.
ISO 9000 is part of the worldwide movement toward systematic quality. Undergoing the ISO 9000 audit process is valuable to companies with no established quality system, since it addresses some of the essential elements for a quality management system. Elements not addressed by ISO 9000, but embodied in the Baldrige Award include emphasis on TQM, continuous improvement and customer satisfaction.
By the late 1980’s, a considerable number of companies doing international business had discovered that the Baldrige Award and ISO 9000 work well together. The European Foundation for Quality Management (EFQM), established in 1988, studied the Baldrige Award. A pan-European quality management award was presented for the first time by EFQM in 1992. The criteria for the European Quality Award are:
- Leadership
- Policy and strategy
- People management
- Resources
- Processes
- Customer satisfaction
- People satisfaction
- Impact on society
- Business results.
In Akio Morita and Shintaro Ishihara’s book "The Japan that can Say No: The New US-Japan Relations Card", Morita, Chairman of Sony Corporation, states that in the 21st century, Japan will emerge as the victor in the superpower economic wars. On another axis, Baldrige winners are proof that it is possible for US companies to be competitive and to win in the tough global markets. And more recently, German Chancellor Helmut Kohl has said the decade of the 1990s belongs to Europe.
INDIA
The issue is no longer what India needs to do to improve quality. The Deming Prize, the Malcolm Baldrige National Quality Award, and the European Quality Award are excellent models to emulate. The issue now is the rate of change the companies must meet to become competitive by 2000 AD. Japan took two decades to deliver world-class products. The US has invested almost one decade and needs more to turn world-class in strategic industries. The EC has commenced its initiative in earnest. To survive, the pace of quality in India must be revolutionary, not evolutionary. The time calls for nothing less.
CREDITS: Suresh Lulla, Founder & Mentor, Qimpro Consultants Pvt. Ltd.