Note: This file was downloaded from the Montgomery County (Maryland) Public Library electronic bulletin board and is presented as received. ----------------------------------------------------Business Index & ASAP------ AUTHOR(s): Feigenbaum, Armand V. TITLE(s): How total quality counters three forces of international competitiveness. (Feigenbaum's Window on the World) Summary: Companies operating on the international level are beset by three forces that threaten their competitiveness. The three forces include the formation of an increasingly competitive global market, the continuing change in customer values as well as the increased economic pressure brought on companies by the global market and the trend towards affordable, high-quality products. Firms are embarking on often unsuccessful quality improvement programs in the wake of these developments. Management that emphasizes total quality can help companies maintain their edge in the increasingly competitive global market. National Productivity Review p327(4) Summer 1994 v13 n3 DESCRIPTORS: International business enterprises_Management Total quality management_Evaluation International competition (Commerce)_Analysis Three new forces are combining to create a competitive crisis for international companies today. The first is the formation of a global marketplace that is increasingly open to competitors from all types and sizes of businesses. More than one billion people are already beginning to buy in common markets in Southeast Asia, North America, and the European Community. More people will be added to each of these markets as they extend further throughout Asia, Latin America, and Europe. The majority of the world's purchasing power will be concentrated in these huge trading areas by the end of the 1990s--an unparalleled transformation in buying practices. This is a new kind of marketplace in which no one wants second-class products or second-class lifestyles, where the wide diversity of cultural and product requirements makes quality the only realistic economy of scale for international companies, and where buying in terms of value has become a new, highly developed skill for both consumers and companies. This phenomenon is creating an enormous increase in competitive pressure, and many of the great companies that once set the pace internationally are now trying to fundamentally transform themselves in ways that would have been considered unthinkable just three years ago. The second force is a change in customer values. It has already taken place within the U.S. and European marketplaces and is spreading to Japan. I call it the buyer's quality strike. The quality strike is one of the fundamental but little recognized reasons for dismal sales in some markets during these past few years and for the slow growth in many European, U.S., and Japanese companies. Buyers' disposable income was at high levels in many of these markets, but sales remained stubbornly low. Why? For many years General Systems has been surveying customer buying patterns in major international markets. The data show that buyers have made quality a progressively more important consideration than price in their purchase decisions. In the last three years, these attitudes have sharpened as buyers have become convinced by widespread advertising, marketing, and media attention to quality that any company can provide essentially perfect quality if it is well-managed. Survey data show that nine out of ten buyers now make quality their primary purchasing standard; however, this is increasingly being expressed as affordable quality. The message from these markets is that quality leadership in the 1990s cannot be measured merely in such traditional terms as quality defects, zero or otherwise. It is instead measured in terms of the total customer perception of quality. This means that the quality of the steel or the plastic or the merchandising service that the customer receives is an important part, but just a part, of the complete support/billing accuracy/delivery/reliability package he or she expects when buying a product. This signals a fundamental social and economic change in U.S., European, and Japanese markets. The economic stability and lifestyles of consumers and the work processes and ferocious pace of companies now depend almost completely on the reliable performance of the products and services they buy. The economic chain from business buyers to consumers has little tolerance for the time and cost of product and service failures. This might be described in technical terms as zero redundancy in the home and office. This is a very different world than that of the recent past. Time is an increasingly shrinking commodity and, if a product or service fails, the cost to the buyer is increasingly intolerable. The companies that understand this recognize that, in today's markets, competitive leadership depends on increasing the number of things going right--both small and large--that buyers want, not merely reducing the things going wrong. The third force is the huge economic pressure on companies that results from the new international market and the drive toward affordable quality. There is strong upward pressure on company cost, and there is severe downward buyer pressure on price. This is a major problem not only for companies in the many slow-growth consumer and industrial markets operating today, but also for high-tech products, from semiconductor chips to computers, when industrywide commoditization can develop within weeks of a product introduction by one company. Cost-reduction programs unaccompanied by a fundamental change in a company's basic way of working have proved to be no more effective in dealing with these pressures than quicky diets have been for weight reduction. What they both lack is a real change in lifestyle. The problem has expanded as many companies have allowed themselves to grow out of touch with the rapid changes in new markets, employee attitudes, and management approaches. I call these companies "disconnected organizations." Often they have worsened their operating environments and increased the competitive pressures by continuing traditional top-down strategic planning methods, isolated from the way their customers actually buy. Their improvement programs have been limited to the use of quick patch-up teams and troubleshooters. They have failed to recognize that fundamental organization-wide process improvement is the key to genuine business improvement. In addition, the organizational bureaucracy of these disconnected companies has overlooked or even purged the basic human competitive strength that comes from using the knowledge, skills, and attitudes that most employees bring to their jobs. Some of the disconnected companies have also continued to make assumptions about the expendability of middle managers or technical managers who can provide the bedrock foundation of knowledge that can keep a company in business. Some of these managers now find themselves in the demotivating situation of not knowing from day to day whether they have a stable job. The unhappy result is a company that has further disadvantaged itself in the global competition for customers and revenue. TOTAL QUALITY IS THE COMPETITIVE CONNECTOR Total quality is the ultimate competitive connector to customers, employees, and suppliers in these chaotic times. It is the most powerful competitive growth strategy that can meet the challenges presented by the forces described above. A common denominator among companies implementing the total quality concept today is their quality-based management leadership and their recognition that a business's culture is the collective result of the business's actions and can be changed to meet today's demanding environment only by transforming and improving those actions throughout the business. True management leadership places strategic focus on key business goals to achieve number-one competitive leadership. Companies should never seek to just do better than last year or to fit the existing industry situation. Management leadership must be based on careful analysis and planning by the people from the bottom to the top of the organization--those who are close to what has to be accomplished, not merely those sitting in the traditional strategic planning department of the executive office bureaucracy. One leading transportation company has successfully executed this concept by strategically focusing on the major quality leverage affecting customer service--length and time of delivery to the customer. Its strategy connects leadership with the competitively superior use of company resources, particularly human resources. It builds among all company employees a basic foundation of openness, trust, and multidimensional communication. This strategy and these resources, in turn, relentlessly connect with the development and installation of the management processes for implementing the strategy and leveraging the resources, from product development and make-or-buy decisions through purchasing and employee skill development. Cost-of-quality management processes provide major reductions in failure costs, creating funding for improving the company. The remaining reductions bring additional strength to bottom-line net operating income in an explicit way that can be reported, understood, and recognized by shareholders, and investors, and employees. Properly understood and effectively implemented, quality cost management is a fundamental basis for the economic strength of companies in these times. This competitive discipline thus rigorously connects the business's strategy with best-in-class management processes that link the company's resources to customer satisfaction, operating cost leadership, and human resource effectiveness results that create and measure the competitive economic and human strength of a company in today's markets. The energy for all this comes from a new quality of management, coupled with a new form of systems technology to support it. Western management must reinvent itself so that it can deal with the global marketplace, customer value, and economic forces discussed here. A quality-connected kind of management with a clear competitive vision of leadership and a bias for action creates an organizationwide atmosphere of superior performance, that recognizes the pursuit of excellence as the most powerful emotional motivator in any organization. President of General Systems, Inc., in Pittsfield, Massachusetts, Armand V. Feigenbaum, Ph.D., is the originator of total quality control. He is also founding chairman of the International Academy for Quality Control and the first American to receive France's Georges Borel Prize for preeminence in quality.