ENGM 620: Quality Management Session Four – 18 September 2012 Quality and Strategy.
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Transcript of ENGM 620: Quality Management Session Four – 18 September 2012 Quality and Strategy.
ENGM 620: Quality Management
Session Four – 18 September 2012
• Quality and Strategy
Mission & Strategy
• Def: The corporate mission outlines a firm’s values, intended markets and product, broad goals and objectives, core competencies, and strategic capabilities.
• Def: The corporate strategy states how a firm will achieve its goals and objectives
What is Strategy?
• Distinguishing strategy from tactics:– Strategy is the overall plan for deploying
resources to establish a favorable position.– Tactic is a scheme for a specific maneuver.
• Characteristics of strategic decisions:– Important.– Involve a significant commitment of
resources.– Not easily reversible.
Sources of Competitive AdvantageSources of Competitive Advantage
COST ADVANTAGE
COST ADVANTAGE
DIFFERENTIATIONADVANTAGE
DIFFERENTIATIONADVANTAGE
COMPETITIVEADVANTAGE
COMPETITIVEADVANTAGE
Similar product
at lower cost
Price premium
from unique product
The Impact of Quality on ProfitabilityThe Impact of Quality on Profitability
Low 25% 60% High
Relative market share
Rel
ati
ve
pro
du
ct
qu
alit
y
Lo
w
33
%
67
%
Hig
h
Rel
ati
ve
pro
du
ct
qu
alit
y
Lo
w
33
%
67
%
Hig
h
Rel
ati
ve
pro
du
ct
qu
alit
y
Lo
w
33
%
67
%
Hig
h
Low 25% 60% High
Relative market share
Low 25% 60% High
Relative market share
ROI (%) Relative Price Relative Direct Cost
Conclusion: Increases in quality add more to price then they do to cost.
19 28 38 107 107 108 104 103 101
14 20 28 103 104 104 104 102 100
7 16 23 101 101 102 104 102 100
Why is leadership crucial?
When goals are set, one of three things will occur:
1. People will achieve the goals and incur positive results
2. People will distort the data
3. People will distort the system
Effectiveness and Efficiency
Leaders
Doing Right Things
Ineffective EffectiveIn
eff
ect
ive
Eff
ect
ive
Man
ag
ers
Doin
g T
hin
gs
Rig
ht
Death(fast)
Success
Death(slow)
Survival
Managing Complex Change
ConfusionSkills IncentivesResources Action Plan
Change
Vision IncentivesResources Action Plan
Vision Skills IncentivesResources Action Plan
Vision Skills Resources Action Plan
Vision Skills Incentives Action Plan
Vision Skills IncentivesResources
Anxiety
GradualChangeFrustration
FalseStarts
Leading Practices (Leaders)
• They create a strategic vision and clear quality values that serve as a basis for business decisions at all levels of the organization.
• They set high expectations.• They demonstrate substantial personal
commitment and involvement in quality, often in a missionary-like fashion.
• They integrate quality values into daily leadership and management.
• They sustain an environment for quality excellence.
Power
The many forms include:– The power of expertise– Reward power– Coercive power– Referent power– Legitimate power
Dimensions of Leadership
• Knowledge– Diversity, learning style, ethics, coping
• Communication– Conflict mgmt, teaming, motivating,
• Planning– Decision making, evaluation, task/time mgmt
• Vision– Assessing internal, external environments, identifying
opportunities
Discussion
• What are some of the ways leaders resolve conflict in organizations? Which of these seem to be more effective?
Costs of Quality
• Prevention Costs
• Appraisal Costs
• Failure Costs
Strategic Process
Mission &Strategic Goals
Competitive Analysis * Strengths * Weakness * Opportun * Threats
SpecificStrategies * Corporate * Business * Functional
Carry OutStrategicPlans
MaintainStrategicControl
Assess EnvironmentalFactors
AssessOrganizationalFactors
Strategy Formulation Strategy Implementation
One of the Tools
Competitive Analysis
• SWOT– Strengths– Weaknesses– Opportunities– Threats
Macroprocesses
• Juran– anatomy of macroprocess does not match that of
the functional organization– Functional goals often at a heavy price of
macroprocess– There should be a clear responsibility for
macroprocess
Inspect Customer
Forced Choice Model
Organization Position•Mission•Objectives •Strengths, Weaknesses•Forecast Operational needs•Major Future Programs
Environmental Assessment•Economic Environment•Key regulatory issues•Major technology forces•Opportunities, threats•Competitor strategies
Strategic Options Action Plans
Contingency Plans
Hoshin Kanri or Policy Deployment
• The Company develops a 3 - 5 year plan• The Senior Executives develop the current
years objectives.• Catchball occurs
– The process is interactive– Teams report up– Management delivers feedback
Leading Practices (Strategic)
• Top management and employees all actively participate in the planning process.
• They customer wants and needs to drive the strategy.
• They involve suppliers in the strategic planning process.
• They have well-established feedback systems for continuous measurement and re-evaluation of the planning process.
Best (Better?) Practices
• Control the quality and operational performance of key processes used to produce and deliver products
• Identify root causes of variation, make corrections, verify results
• Continuously improve processes to achieve better quality, cycle time, and performance
• Set “stretch goals” and make extensive use of benchmarking and reengineering
Strategy, Quality, and the Supply Chain
• Logistics?– When shall we ship?– What mode of transportation shall we use?– How do we optimize our shipping practices?
Strategy, Quality, and the Supply Chain
• Suppliers?– Who are our preferred suppliers?– What is our process for supplier selection?– How do we develop suppliers?– How do we link with our suppliers?– Do we source globally?
Strategy, Quality, and the Supply Chain
• Inventory management?– Where do we optimally store inventory– How much? How long?– Do we have perishable stock?– Do we carry safety stock?– ARE we maintaining good levels of service?
Discussion
• Why might the forced choice model be useful for companies inexperienced in strategic planning?
Discussion
• What is the concept of catchball?
Discussion
• Juran argues for both incremental improvements and breakthrough thinking in the strategic plan. Do you agree?