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CASE STUDY The Case Of TQM and Innovation Continued.. THE DISCUSSION
Using a static model of TQM is always dangerous. CEO Narayanan should focus Horizon's TQM program on a dynamic model--such as the Malcom Baldrige or European Quality Assurance (EQA) Models--which aims at achieving total business excellence. They are not static like the one used by Horizon; they are continuously upgraded on the basis of the learnings from best-in-class companies, and factor in changes in the external business environment. Business processes change on a regular basis, and can never remain the same, especially when the environment is in a state of flux. Most important, the criteria used by both models are non-prescriptive and, therefore, encourage companies to be highly creative, adaptive, and flexible. In fact, both the Baldrige and the EQA Models have separate chapters focusing on innovation and creativity. Chapter 5 of the EQA Model, for instance, deals specifically with the identification and evaluation of critical success-factors. This includes specifics on how the organisation can focus the creative talent of its employees through improvements that are either incremental or breakthrough. It encourages the innovation of designs, technologies, and operating philosophies. Another important module of the models deals with the customer's changing perception of products, services, and customer relations. The strategy development process in Section 2.1 of the Malcom Baldrige Model, for instance, looks at an organisation's capability to create new opportunities, and evaluates its ability to innovate. Clearly, there is no dichotomy between TQM and business excellence. And innovation and creativity are integral constituents of the latter. Horizon is, possibly, strong in manufacturing excellence, and weak in innovation. If the key focus in the company is to shift to innovation, the TQM model is flexible enough to provide for, and reflect the new thrust. A few appropriate changes in the assessment-framework can actually facilitate this. It is true that ISO 9000 imposes a certain discipline of conduct, and seeks conformity to certain norms. And it does generate a bureaucracy of its own. There is a tendency to over-document procedures and processes, often without examining their relevance to business results. This, of course, has the advantage of providing a quality focus to the entire organisation. The flip side is that it may stifle the creative talents of individuals, and not allow an organisation to realise the full potential of its people. The key is to move quickly out of this particular mode, even while consolidating the gains of the system, towards a dynamic model of business excellence. Team-work is, indeed, the cornerstone of TQM. But, sometimes, people feel that consensus means the absence of confrontation. This is not consensus, but a compromise, where one plus one equals one-and-half. It is only when individuals are forced to compromise that they become disillusioned with TQM. The best way to avoid this is to look at team-work as a synergistic process, where one plus one equals 10, 15, or even 100. A consensus based on synergy would entail brainstorming and valuing differences of opinion. It is only through such a mindset that you can encourage creativity. When you foster an environment which encourages an openness to new ideas and a willingness to accommodate different points of view, you automatically make room for the generation of breakthroughs. That is how organisations like Motorola, AT&T, and 3m develop new products and services regularly. TQM is, basically, people-oriented. A culture that values performance, transparency, and candour is a pre-requisite for quality improvement. Narayanan and his team must realise that balance is of the essence irrespective of the nature of the change-initiative they adopt: TQM, BPR, or ABC. The moment you move to one extreme in any area, the balance tilts. Development in that area can only come at the cost of development in others. Companies where large-scale downsizing has been one of the modules of BPR have not been able to reap its benefits primarily because the need for balance was ignored at some point of time. Even ABC, if carried to an extreme, stifles creativity and innovation. It is important not to pursue any change-initiative in isolation of the larger organisational concerns. Horizon should achieve a balance between cost, quality, delivery, and innovation, and it should work on all 4 parameters simultaneously. Finally, a word on Horizon's self-assessment process. A score of 850 out of 1,500 works out to 56.67 per cent. Agreed, a good score but, in both the Baldrige and EQA models, such a score would indicate that Horizon has not reached the level of excellence. Food for thought for Narayanan.
Horizon has clearly travelled some distance into TQM. However, Narayanan has not, as an individual, moved with the times. His unstated approach seems to be that quality is "freedom from errors." This is a defensive approach, which characterises the early stages of TQM. At this stage, the focus is purely on the elimination of defects and the spike-points of customer dissatisfaction. As TQM establishes itself in the organisation, the focus gradually moves to the satisfaction of customers' needs--stated, latent, or anticipated. The focus is then on the creation of quality that attracts customers through product-differentiation. Attractive quality is, sometimes, about improving an existing product but, most often, it is about innovation. Two instances: Konica finds that amateurs often forget to use the flash in their cameras. Result? Autoflash. Komatsu finds a need for underwater earth-moving equipment. Result? An underwater dredger. At the same time, it cannot be denied that Narayanan's concerns over the lack of innovation are genuine. But Jetley's analysis--which tars all change-initiatives with the same brush to suggest that all of them extract a price in terms of stymied innovation--is a bit off. ABC is a managerial tool and a good one; it is neutral to innovation. BPR is a technique which applies blue sky thinking; sometimes only to reinvent the wheel into something of a polygon. And BPR does nothing to institutionalise innovation. But TQM is different. Innovation is an integral part of TQM's ethos. It is a complete management approach, vastly different from what companies usually do with it. It creates a foundation of excellence that can nurture the pioneering spirit of entrepreneurs and the creative spirit of individuals, thereby unleashing the power of offence backed by defence. Horizon has, evidently, enhanced its defensive abilities. Now is the time for the company to introduce attractive quality by applying the template of TQM to new product-development. Until then, there is no real TQM at Horizon. I do not agree that it may not be possible to pursue innovation while simultaneously tackling issues related to quality and cost. In a sense, it is true that any change-initiative should begin by focusing on the elimination of waste; innovation in the absence of such a defensive-base will fail. But some of the most powerful innovations in products, technologies, and even management know-how have been made by companies that have adopted TQM. Toyota continues to innovate at an astonishing pace; it is also the stable from where concepts like Just-In-Time, 5-S, and Cross-Functional Teams have evolved. Nippondenso is not only at the cutting-edge of technology, we owe to it the concepts of Early Stage Instability Control and, of course, TPM (Total Productive Maintenance). In the US, Xerox rejuvenated its new product-development through quality efforts, and gave us the tool of Benchmarking. In fact, innovations are more a rule than an exception in great TQM companies. It is a misconception that ISO 9000 discourages people from breaking away. Why blame ISO 9000? It is, after all, no more than a maintenance document. Improvement, let alone innovation, is not in its scope. Companies which freeze their standards without first learning to improve get stuck in bureaucracies. Equally wrong is the thinking that TQM focuses only on gradual, incremental changes, and that the process itself tends to be linear and predictable. In any case, what is wrong with small improvements? Continuous and small improvement can, at times, mean quite fundamental changes. Toyota receives 2.50 million ideas ever year, which translate into 2.50 million acts of creativity. Horizon's senior managers need to remind themselves that policy-deployment--one of the pillars of TQM--is concerned, essentially, with breakthroughs. TQM is founded on explicitly-stated principles which lead to 180-degree turnarounds in the way things are done. The way vendor partnerships are built, for instance. Or the way team-spirit is promoted through active employee participation. TQM is about the uncompromising rejection of the quick-fix. TQM--and incremental and linear? No way. TQM is a "thorough revolution," as Ishikawa said. How can Horizon make innovation a part of its strategic policy? Making innovation the organisation's theme may sound good, but it will achieve very little in terms of real ideas. Encouraging people to question the impossible, and moving the company beyond its existing boundaries is a good idea. Only, as CEO, it would help if Narayanan were to ask himself that question first. Of such questions are born great strategies. But it is not sufficient to say: back it up all the way. Horizon needs a management system to translate the breakthrough vision into a popular initiative in which everyone must participate. That mechanism is policy-deployment. Sending every employee to vendors, customers, and dealers once in a while is a good idea. But the organisation must assess if it has the capability to deal with customer needs. Otherwise, it will only breed cynicism--as TQM has.
Narayanan's apprehensions are misplaced. Change-initiatives like TQM, BPR, and ABC do not stifle innovation. On the contrary, they promote it. The belief that TQM brings about only incremental improvements is false. That it brings about incremental improvements at the cost of innovation is an even bigger fallacy. A close look at any TQM model will convince even the most die-hard unbelievers that innovative and incremental improvements can take place simultaneously in a TQM initiative. Both the Baldrige and EQA criteria encourage the adoption of innovative and incremental improvements in tandem. The Japanese have mastered this art to achieve competitive advantage. It is important to understand that innovation requires capital investments while incremental improvements happen with little, or no investments. Even while making investments for innovation, Japanese companies manage to achieve a positive performance-edge over their competitors through sustained incremental improvements. Clearly, companies like Horizon are unable to supplement incremental improvements with innovation. Over a period of time, this inability tends to reduce the impact of innovation on their business results. Even the self-assessment model being followed at Horizon does have a provision for innovation. It is there in the fine-print. Evidently, Horizon--like most other companies that use a self-assessment template--has been liberal in scoring itself and has, in the process, ignored the small stuff. All Narayanan needs to do is to revisit the model, and consider 2 specific parameters: Leadership, and Strategic Planning, which have some bearing on his own role as a change-agent. He should be firm about the pace of change he seeks. This is where the Leadership parameter matters. At the same time, Narayanan should be clear about the direction the company should take to achieve this change--an area in which Strategic Planning comes into play. This module will help him decide whether Horizon should seek the incremental route or the innovative route or, as the Japanese do, a combination of both. There are a number of tools--like BPR, TQM, or ABC--that he could deploy in this context. The essence of a successful change-initiative is using the right tool for the right project. Let me highlight how these tools are interlinked, and how innovation is an integral part of all 3:
What is quality? You can look at it in 2 ways, one proactive, one reactive. The proactive approach defines quality from the customer's perspective. It expresses quality in terms of product features that attract a customer to purchase Company A's products in preference to those of Company B's. This demands an understanding of individual market segments, and requires innovative responses to change. The reactive approach expresses quality as freedom from deficiencies; its main objective is cost-reduction. In a reactive approach, it is the customer who chases a company, not with orders but with complaints. Clearly, it is the proactive approach to quality which should drive a change-initiative. There is no compelling reason for Horizon to change the weightages assigned to the parameters in its TQM model. A few modifications in its assessment-framework should do. What Narayanan should do, in addition, is to track business results for at least 3 years; compare them with those of the company's main competitors'; benchmark the practices of world-class companies; and invite a third party to conduct an assessment of the company. This will enable him to introduce an element of rigidity and objectivity into the framework.
It is imperative that a company implement change-initiatives while keeping the perspectives of value-creation and process-simplification in mind. In a competitive market, where the customer has to be delighted, the real challenge of leadership lies in stimulating a drive for excellence in the organisation. Which should encompass all areas of business. What companies like Horizon need is a culture that is oriented towards the creation of customer- and shareholder-value. This can be done through efficiency-enhancement techniques--like TQM, ABC, and BPR--or growth initiatives--like value innovation, product launches, and diversification. The impact of change-initiatives has been encouraging at Horizon, which has registered some progress on several parameters. But its focus on long-term growth has been limited. It is important to understand how and why this has happened. Therein lies the clue to Narayanan's disillusionment with the way things are. It has happened because the people in Horizon are driven, not by a common vision, but by systems and structures. When individuals are driven by a shared sense of purpose, they are motivated to achieve higher levels of excellence. When they are driven by straightjacketed rules and regulations, they are, obviously, stifled. What has happened at Horizon--and this is typical of most companies undergoing a transition--is that people are seeking comfort in their roles as prescribed by the prevailing systems. They are obsessed with self-preservation, concerned only about retaining their jobs, and, in the process, are unwilling to experiment. In fact, the limitations of techniques like TQM do not lie in the processes that constitute them, but in the environment in which they are deployed. Any change-initiative creates some level of stress in the organisation. A company's reaction to change--which could vary from delight to disillusionment--is a function of the way in which it is handled. The only safeguard against disillusionment lies in the creation of an environment which respects the individual, and recognises his creative contribution. To my mind, Creativity = Inspiration × Imagination × Environment. Note that it is a multiple. This means that if the contribution of any of the 3 elements is zero, the overall creativity of an organisation is zero. The most significant role of the senior management team is to provide an optimal organisational climate. Indeed, the only external factor in this equation is the organisational environment, the other 2 being specific to each individual and her level of competence. This approach is driven by the belief that, given the right environment, every employee is capable of being creative. Therefore, apart from demonstrating a visible commitment to business results, the senior management should create enabling processes to ensure a culture of value-creation. In Horizon's case, this translates into 5 areas of action:
Implemented as a package, these steps will not only streamline the efficiency-enhancement techniques at Horizon, but also smoothen out the rough edges in their implementation. It should also be able to eliminate factors that seem to be inhibiting innovation. However, the issue of growth remains unanswered. This, as I see it, should be managed by non-hierarchical, empowered, cross-functional teams. Innovations do not happen in a day nor do they yield immediate results. But, when they do occur, the results are dramatic, and can take the organisation beyond its existing boundaries. It is imperative that Narayanan and his team launch a dedicated product-development drive to ensure that Horizon creates value in the long run.
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LEONARD D'COSTA
N. RAMANATHAN
SURESH LULLA
V.K. RAJPAL
