TQM in the New World

TRIMILLENNIUM MANAGEMENT
TQM in the New World

By S.B.Tilloo

Some 12 years ago while travelling in Europe, a senior executive from a European consumer product major sitting next to me on the aeroplane said - the Japanese products have created a problem - you bring them home, plug them in and they always work. The well known 1989 MIT study captured in the book - 'The Machine that changed the world' - revealed that European luxury cars had on an average 45% more assembly defects than a Japanese volume produced car. The huge loss of market shares suffered by the American and European companies to those from Japan is history. Everybody woke up to Total Quality Management (TQM). TQM appeared as a panacea to win the customer and the shareholder at the same time. It promised to give customers defect free products and to the company, low costs without waste, delays, mistakes or accidents.

The New World:Only one in 8 of the 1000 largest manufacturers has out-performed the Standard and Poor 500 stock index since 1988 and fully one third have seen the value of their stocks declining. The service economy is clearly overtaking the product economy. In India too, services and knowledge industries are growing much faster than manufacturing.

It is a definitive trend as we enter the new millennium that the growth will be in services. But what's happening to products ? They are increasingly being sold as part of a service package. As recent data shows, less than 20% of annual cost of PC use is in desk top hardware; and in the U.S. less than 20% of average annual household expenditure related to cars is on the actual purchase of the car. In case of industrial products, while optimising the supply chain, the buyer looks for effective cost and speed of usage of the product. The services offered before the sale, benefits in inventory management and after sales support very often outweigh the importance of the product once the supply exceeds the demand, which is the case more often than not.

The dramatic innovations in digital technologies enable down stream services to be built into a product. The so called "Smart Products" can take on chores that otherwise the user would have to perform. Scores of examples keep coming up in areas ranging from home appliances to industrial machinery. Devices for self diagnostics are getting embedded. In a far fetched example, it was reported that a semi-conductor machine after doing its own diagnosis, even informs on its own the machine manufacturer using embedded cell phone requesting expert assistance. As the service element becomes more and more important, the goal of TQM has to move beyond reducing variability and defects. Services have to be user friendly. For example, a supply chain software connecting the supplier to the customer should not only be defect free and reliable, but also friendly and easy to use.

While the globalisation is increasing the product proliferation, economic growth is bringing up millions of new users. Producers have to think about friendliness of their products to users spanning wide range of sophistication. To illustrate, the large variety of hot and cold water mixers that one encounters in hotels around the world, and the painful experience of figuring out the way to use them.

From reducing variations to meeting customer expectations, and making products and services user friendly is the direction for TQM. And when each consumer may have different tolerance level to things going wrong, finding a way to manage emotions, will be the challenge producers must exploit. The goal of TQM therefore has to move from zero defect to zero customer defection.

Processes for TQM : The globalisation brings far flung competitors to our door steps if not to our computer screens. Every company has to figure out its way to global competitiveness. While equipment, materials and money will move freely across the borders offering fleeting arbitrage opportunities, the local infra-structure and local people will make a difference. Recently, an electronics component customer advised me to worry about China and not Korea and Japan. The Chinese are using the same technology with much cheaper labour and higher productivity. The infra-structure - physical, social and regulatory will be a critical element of competitive advantage or weakness. The most important difference would likely come from people - their discipline, their learning ability and their innovativeness. Managements will face their critical strategic challenge in identifying what is their source of global competitiveness.

When we think of TQM processes, we think of techniques like seven tools seven steps of problem solving, SPC, Six Sigma, Quality Circles and so on. The genius of Japanese workers - their diligence and their ability to work together showed off the wonderful power of Quality Circles. In India, where money is so expensive and plant and machinery costs so high, TPM (Total Productive Maintenance), with its focus on overall productivity, can make a big impact. On the other hand, abundant brainware which is already leading to dramatic growth in the infotech industry has a potential to be used for TQM in India. Therefore processes to improve acquisition of knowledge and its application will help exploit our competitive resource for TQM objectives. We can leverage infotech for dramatic improvements in meeting customer expectations and improving all round productivity.

Managements will have to choose their critical resource mix for global competitive advantage. Appropriate TQM techniques and processes could then be used to multiply the benefits from such resource mix.

Organisations for TQM : Fiercely increasing competition arising out of globalisation and new technologies is already closing the ranks of owners, managements and employees. Downsizing across the companies has certainly helped them to be more efficient, faster and to use information technology more productively. De-layering has helped executives to see the underlying purpose of companies i.e. to deliver value to customer in a way that creates profits for shareholders. In the world of market economies where owners, customers, employees and suppliers constantly gravitate to wherever value is maximised, unity of purpose would be the most important driving force for organisational success. Company will no longer be a place where employees sell their labour for a salary but where they have maximum opportunity to grow personally in every respect, make a contribution to the society but without compromising their cherished values. They will come to companies because they can use resources which otherwise are difficult to own.

In this new organisation, constantly evolving and clear definition of roles for everyone from top management to the worker will be very critical, because it will enable him to contribute with freedom for himself and lowest cost to the organisation. Even in companies which are trying to become process enterprises, the conflict between power in the vertical units - focussed on regions, products, functions, etc., and need of authority in managing horizontal processes - supply chain, customer satisfaction, product development, etc. has not been satisfactorily resolved. New organisations where horizontal and vertical structures co-exist, will be needed where team work and customers will win over turf and hierarchy.

These organisations cannot be built by structures alone. Individuals and groups will discover what Stephen Covey describes as the much greater power of interdependence compared with independence. Many companies are discovering that it is much more difficult to convince an authoritarian expert to become a coach than for a strong people developer to learn industry expertise. In this area, we have a powerful heritage of a range of techniques in meditation, pranayama, yoga which can help people to change their habits and bring transformation in their behaviour. At the same time in operating terms it means executives with innate character and mindsets favouring quality in every action, will drive organisations, big or small, towards TQM objectives.

Technical knowledge and skills will face increasingly shorter life spans. Yet they will be critical to success of organisations ranging all the way from functional management at the top to the operating skills at the bottom. The phenomenal break-through in information technology provides interactive learning tools where an individual can work at his own pace. Likewise, powerful simulation methods and equipment enable him to acquire skills to operate expensive and critical machinery and apparatus. These will help companies cope with the need of constant learning in this area although this may not pose the most difficult challenge to managements.

It will certainly be a different world. No guaranteed rents for owners' money, or manager's smartness or worker's life time job - it will all have to be earned. Only customer will decide who earns it. He will go to whoever pleases him and meets his expectations. The challenge for TQM has only begun.

Sudheer B. Tilloo, Managing Director, DGP Hinoday Industries Ltd, Pune

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