Managing Quality Innovation A and Knowledge Exam Revision

7/31/2019 Managing Quality Innovation A and Knowledge Exam Revision

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Why Quality and Innovation are Important 5/27/2012 3:41:00 PM

Why is Quality Important

- Quality is not a problem until something goes wrong, purpose of quality

systems and procedures is to prevent things because cost of prevention is

much lower than cure

- Do it right the first time, rather than rectifying all the defects, and make

sure its consistent and reliable

- Minimal standard of quality we expect, basic consistency and reliabilityabout the things we buy and about the things we use.

Doesnt harm

Doesnt cause problems

- Govt sets regulations about the basic level of quality is

Cars, has to conform Aus design rules; heres basic level of equipment

has to have to operate safely and reliably on AUS roads

- The effect of market failures can be catastrophic

- Not just an individual firm being affected rather the market of the whole

product/ service being affected from the problem

Melamine in milk in the Chinese dairy industryo Third largest dairy industryo Minganui dairy was adding products to change colour and

smell better

When they over did it, it caused the death of manyinfants due to toxic effects of the additive


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Cadbury in Beijing had to cease operations Many countries banned the milk and milk products

from China

o Whole dairy industry in china was affected. People,domestic and international, lost faith in the industry

o The joint venture with NZ affected Fontera who didnt havequality systems in place to prevent it

o It took a year to recover in china and 6 months forinternationals to allow diary exports

- The effect of organizational failures can be catastrophic

Pan Am and Lockerbie airlineso From 1960s to 90s, largest airline in the worldo It was subject to terrorism and hijackingo People questioned the security of airlineso 1980s it was hijacked and killed 20, injured 100o Pan Am security Institute as a preventative measure in

response to consumers

To costly to implement security checks that is nownormal today

Didnt act on policies and implement them 1988, one plane was blown out in the sky 270 people

were killed

1990 first gulf war broke out, airport security waswanted more by consumers

1991, airline went bankrupt and out of business Peoples perception of quality standards change overtime

o Quality is a dynamic thingo E.g. As terrorist incidents adjusted perceptions in security

of flying

Qantaso QF32, no2. Engine exploded in Indonesiao Managed to wave the issue as no one was harmedo Management or sheer luck?

Enquiry into this found that if it occurred not longafter take-off effects would be worse


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- 30 years ago; asbestos was no an issue; used to prevent in-house fires

Had long-term health affects Quality changed overnight

o Asbestos was perceived as high quality to dangerous andbelow minimum standards

Basic minimum standards of quality change overtime and firmsneed to keep on top of things and keeping up with the changing

social environment

- Competitiveness issues effect firms

Customers expectations have increasedo The benchmark to what quality is higher

Quality is an important competitive weapon

- Practice management of Quality can improve competitive position of the

firm.

- Quality tools provide a guide to good management practice

Quality Planning underlies innovationo Built on the back of good quality practice

Problem solving tools underpin employee involvementBest Efforts Are Not Good Enough

Best efforts are essential. Unfortunately, best efforts, people charging

this way and that way without the guidance of principles can do a lot of

damage. Think of the chaos that would come if everyone did their best,

not knowing what to do?"

W Edwards Deming

Underlining importance of having a system in place to understand what

quality performance is like.

E.g. what to do in an aircraft when the engine catches fire.Why Innovation is Important

- Achieving high valuated performance


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- Basis of economic growth

Expand inputs labour, land, capitalo Thats why Aus has innovation programs with immigration

to bring in knowledgeable workers

o If land is used more productivelyo Traditional view was doing this through warfare

Napoleon became emperor because he invadednations and bought back to France

Nation depended on the loot he stole the keepadministrative machinery of France running

Expand innovation- Innovation overcomes resource limitations

Tokyo, most of the nation was wiped out in WW2 Expended own human capital they had to become one of the top

manufactures in the world

Developing individuals to make innovation and improvement inmanufacturing

- Technological change alone is subject to diminishing returns

E.g. Electronics industryo Generations of electronic goods get shorter and shortero Better and more advanced products come out more quicklyo Dynamic and moves quickly

- 10 years ago Nokia was the most popular company in terms of

electronics

Have been taken over by Apple and Samsung because haventkept up with technological changes

o E.g. touch screen, cameras etc.o Nokias success was short lived

This is the fate of most firmso Build up technology, ride its success then fall because that

technology is waning

Demise of Kodak


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History, Definitions and TQM 5/27/2012 3:41:00 PM

Competitiveness

Competitiveness is the degree to which a nation can, under free and fair

market conditions, produce goods and services that meet the tests of

international markets, while simultaneously maintaining or expanding the

real income of its citizens

Presidents Commission on Industrial Competitiveness

History of Quality

- 40 years ago the way quality was managed was informal now formal

With rising expectations quality Growth of large scale organisations that produce goods and

services where we care about the quality of

In the past:

- Craft work

Individual skilled worko Produced in small workshops with small numbers of highly

skilled artisanso Before industrial revolutions, artisanal production was main

source of quality

Quality rested on the reputation of the master craftsman (or theregion)

o Would have assistance and apprentices learning that tradeand people develop skill knowledge and expertise to

becoming a master craftsman

o Produced under the supervision of master craftsmano Look at quality of master craftsmen and the products that

were produced under his supervision

o Quality was a relative thing Standards of quality differed from one workshop to

another

Could be inferior or superioro This is why perception of high quality is classified on a

regional basis at times


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E.g. best silk is in France Best crystal is in Bohemia

o This is still relevant to wine e.g. Champagne is from Franceo No absolute standardso Ancient Greece

250 BC, 27 year war at Athens All shields and swords made from 25 people in a

workshop, this was considered a big number

o 1903 Ford model 125 workers were employed to people to

make cars

These were hand made in the craftsmen standard Specialised crafts people working on different parts

of the vehicle

Eventually organisation expended to 30 000employees, this was difficult to manage on a

personal craftsmanship basis hence a standard was

set.

o Things dont change very much in terms of Craftsmanship

- Standardised work (Industrial scale SW System)

Standardised tasks and standardised partso They became simple and repetitive taskso Rids of variation of how craftsmen did ito Parts- to substitute one gear box for another etc. so they

are all identical

Quality rests on the reputation of a brand nameo More of a collective rather than the individual efforts of the

craftsmen

o We expect that company to have a management system inplace to manage and control quality.

Ford went to 1700 cars in 1903 in a year and priceswere high

1911 300 000 cars in a year and prices dropped(economic benefits)

Economies of scale by standardising processes


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o Quality therefore has to change In history not many would respond to poor quality as

there was not much power amongst consumers

King James Bible Many typographical errors, leaving the

word not from the 10 commandments

Forced them to reprint it and destroy theoriginal

If you werent a king you didnt havemuch recourse for poor quality work

Today consumers have much more recourse as thereare quality standards and systems in place

Has come from large scale organisations (forproducts and services)

All require a system for the management ofquality that fits with the standardization and

routinisation of tasks and procedures within

any large-scale organisation

Definitions of Quality

- Excellence (Subjective Judgement)

In observing the excellent companies what we found most striking was

the consistent presence of obsession. This characteristically occurred as

an unjustifiable over commitment to quality, reliability and service.

Peters & Waterman

This is still is use by companies who produce high-end luxurygoods who can afford to overspend to achieve such quality

The obsession of perfectiono Not concerned about price and market shareo Produce a couple, sell for high prices.

Not many operationalise this definition of quality as it istranscends, what is perfection to me isnt perfection to you.

o Perception of individuals is different Pursue Excellence


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- Conformance

"conformance to requirements"

Phillip Crosby

It can be operationsalised; Here are the minimum standards youhave to meet in order to accept what quality means

This is the rock bottom standards to stay in business Appeals to firms who want to operate on commodity products

(low cost, low price, high volume)

o Do what is necessary to meet the legal requirements It is an internally focused definition

o Only talks about what happens inside of the companyo Not focused on market place and consumer demands

Concerned about conformance- Neither of these two are FOCUSED ON THE MARKET

MARKET FOCUSED AND MARKET BASED DEFINITIONS

-Incorporates customer feedback into the function and design of products

- Fitness for useGood quality does not necessarily mean high quality. It means a

predictable degree of uniformity and dependability at low cost with a

quality suited to the market."

W Edwards Deming.

If it does what it says in the box it is a quality product Low-cost product means quality should suit for that end of the

market

High-valuated product means quality would have to reflect thatend of the market

Meet expectations of that market segmento Focus on the attributes of quality depending on the

standards (relevance) on different consumer segments.


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- Meeting or exceeding customer expectations (Quality as acompetitive weapon)

"the totality of features and characteristics of a product or service

that bear on its ability to satisfy stated or implied needs"

International Standardisation Organization

- Value adding from the customers point of view means

Not simply meeting basic but doing more at no costo E.g. Japanese Car companies

Buy it at the same price as American car but withair-conditioning and radio as a standard, something

American cars didnt give Implied- unmet needs that they didnt know they had until they

experience something from a product

o E.g. Air-conditioning in car- Last three definitions are part of the standardised quality systemsthat formulises and rationalises knowledge about quality

Avenues to Business Improvement (Implementing Quality

Systems)

- What Quality systems can do (including conformance) Viable Business

Strategies:

- Reduce Wastes

- Eliminate defects, reworks, warranty returns and takes a lot of cost out

of the business

Labouro Of people having to spend time reworking something

Materialso That is scrapped, damaged and returned

Machineso Reduce time used to make defective goods

Increase Market Share


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- If adopt market based quality can improve competitive position and

expanding market share.

Reliability = Single Source Suppliero Of products, who is the reliable suppliero Single Supplier buy all products and goods, work closely

with that supplier overtime to reduce costs

o Supplier POV, grows their business Low Margins but high volume = profitability

o Expand production volumes Efficiencies from demand smoothing

o Internal quality efficiencieso Figure out ways to stop wasting time of the manufacturing

of product form A to B to C and smooth out demand andproduce more consistently and reliably

o Single Suppliers after working with a company for a longtime can gear their products based on customer demands

and create such internal efficiencies

- Charge Premium Prices

Unique Featureso When consumers want unique features then charge

premium prices

Mazda cars Reputation for Quality

o Consumer purchase goods because company is known tomake good quality products

Market Based def of quality, the focus on market demands and customer

complaints means increase in competitive advanced in terms of external.

Attributes of Best Practice Manufacturers

- Becoming the best competitor

- Growing more rapidly and being more profitable than competitors

Get better rep for quality Grow market share


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Have unique features and they can charge premium prices for- Hiring and retaining the best people

- Being able to respond quickly and decisively to changing market

conditions

More agile and flexible in that sense as perceptions in consumerschange

- Adopting a product and process engineering approach which maximises

the performance of both

Consistency of product and process internally Have ways of making them that enhance quality an low cost

- Continually innovating and improving

When rely on market-based definition Way in which you exceed peoples expectations, people dont see

it before, provide value added

TQM

Approaches to Understanding the Adoption of TQM

- Ideal or Common Types

Here is the ideal type of conformance firm Generic thumbnail sketch Create generic ideal types of firms and the way in which they

respond to the quality and changes to innovation

- Contextual Factors

Empirical approach; what are the things that high performingfirms do that differ from the things of lower performing firms

Ideal Types

- Hard vs Soft elements of TQM (No firms match up to these caricatures

but provide a thinking about how firms do certain things)


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Hard (Quality Management Program); all the rational side f TQM,data collections, stat analysis, problem solving tools use to

measure and analyse things, identify problems and solve them

o Done by technical experts Soft (Quality Management Program); cultural and normative

elements, how to empower employees to work on quality

elements, make initiatives and come up with ideas and

suggestions for innovations, change so everyone has focus on

high quality production

Some use both soft and hard

- Mechanistic vs Cultural model of organization-

o Mechanistic; Beurocratic, the army, hierarchical organisationwith forma rules and procedures that are expected to be

followed by employees

o Cultural; Relies on normative culture of organisation, peopleare equal and commitment and passion is what binds them

together, collective norms and values to achieve mission/

vision

- New quality paradigm vs Old quality paradigm

Old; Quality as conformance; minimum standards that need tobe followed. Quality is a technical job that only the quality dept.

focuses

New; Much employee empowerment to identify and rectifyquality problems, focusing externally on what customers are

looking for.

Contextual Factors

- Job security

If high wont put the effort into contributing to innovation andhigh quality

Only concern is staying the job which can restrict employeeopinions on improvements as it could mean firing


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Steel company said if you think of an improvement you will losejob, go and get more paid education the return to a better job.

- Management's approach to trade unions

Employees looked at how management treated unions If they saw poor treatment then figured thats who management

would treat those who are not from unions

Trade unions have positive effect, have organisation widecoverage and ensure consistency in policies and programs

Large firms found patchy quality systems because localmanagers were afraid of employee empowerment

Unions demanded even rollout of the quality program- Organizational politics

If accountants are in charge, they will focus on cost reduction Quality means expenditure and this cold create a political issue

in terms of how much should be spent in each department and

those in charge may have some biases

- History of the organization

Introducing innovation and improvement vs those who havefailed with the introduction resulting in cynical employees

- Market conditions

Those that are able to charge premium prices have moreexpenditure for quality

Position in the market is important If sales are going well, money is available for improvement but if

conditions are bad this is the first place costs are cut.

- Management policy

Senior management view on quality for competitive advantage- Employee attitudes and orientation

Norms and culture of organisationTheoretical Frames of Reference


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Quality and Innovation in Business Processes5/27/2012 3:41:00 PM

Understanding Business Processes

- Sequence of activates it takes to make something happen

to design, manufacture and distribute- Process improvement is critical part of quality management

- Process innovation significant element of innovation.

- Korean Ship Building Industry (REVERSE THINKING APPROACH)

Koreans became words largest builder of ships due to the way ofbuilding ships differently to which the way it was built before

o Improved productivityo Lowered Costs

Building ships in modules (pre-fabricated sections) Brought to shipyard and then welded it at the yard Built ships in the water with a floating dock On land shipbuilding method

o Build ship and lift with levero Move ship to barge with skid-steer loadero Submerge barge

Supplied gas directly from a ship to new Orleans Sinking ships of purpose to ensure Only finished ones float On board production for oil refinery

o Also Build a tanker that breaks ice

- Systems approach

Understanding a process like a black boxo Put one thing in take another out

Transforms set of inputs to a key output Steel and consumables to building process and

output is ship and some waste materials

- Process mapping

Process is a sequence of activitieso Draw boundary around which activates we are interested ino Their Domain of Activity


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Marine Architect Manufacturers Engineers etc.

Organization Sub-Systems (AUTOMOTIVE MANUFACTURER)

- You can take any process form a higher level and decompose it to alower level in any detail

- Important because not all management want all the levels in detail

Senior management can look at the higher level of extraction forstrategic purposes

Production managers look at the lower-level and more detailedprocesses

Example of a Process Map


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- Simple sequence of activities (looking at a whole factory)

- Flow-chart is a process mapping tool for a job stations

- More and more firms have a mixture in processes of manufacturing andservices

VW open factory museum, can customize cars for individualneeds

o Mixture of services and manufacturing operationo VW isnt the only company who is like this

Reinventing themselves to have a larger servicecomponent

Call centers, online transactions (are they services or industrialprocesses?)

It is hard to find that lineProcess Choices in Manufacturing

- Critical Variables are:

Capital Intensity


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o Fixed investment in machinery, plant and equipment Important in manufacturing context

Product Standardisationo Degree to which the product is customised to customer

requirements (Comes out the same of very similar)

Having heavily standardised products- Process Focussed

Have invested in general purpose equipment and a set ofprocesses, become an expert in this process and what you can

make can become very variable

o E.g. Printing station Can make hand bills, cards, pamphlets, books etc. Anything that can be printed they can manufacture Hence experts in the printing PROCESS

Jobbing process Batch process ??? Construction machines are experts in building an can move that

process to build different things

o Wembley stadium in London (non standardised product) Making things in small volumes

o Small > Medium production and uses adaptable processes

- Product Focussed

Flow process (line & continuous)o Small number of standardised thingso Oil refinery

Only a small number of products it manufactures butin huge amounts of volumes

Expertise is in making that product e.g. in this casepetrol

Process Choices in Services


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- Produce things that are a lot more intangible

- Only dominant part of the economy in the last 30 years

Critical Variables are:

Degree of customer interactiono Length of time customer is involved relative to the length

of time it takes to produce the service

In terms of professional services Patient being involved in operation Online banking?

Is there much customer interaction? High technology services doesnt look much

different from manufacturing as there is notmuch interaction

Doesnt give a reliable definition of what aservice process is

Labour intensityo Amount of resource required at the time of service

Number of people it takes to produce the service E.g. all the staff involved in the operation (around 8-

10) High labour intensity

Doesnt talk about type of intensity High Human Capital (Specialists) to Low

Human (McDonalds) capital intensity; are these

services equivalent because it requires many to

produce a service

- Service factory

Low labour intensity Low customer interaction Call centre

- Service shopo Low labour intensityo High interactiono Car repair shop


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You can specify what is needed- Mass service

McDonaldso Low customer interaction

There is a set menu and consumers dont get tocustomise foods based on their taste

- Professional service (need for skilled education and training)8

Operation in hospital High Labour intensity High customer interaction

Services are subject to technological change (happens quickly)

From Service Shop to Mass (Service Factory), Netbanko From interacting with a Teller to online

Centerlink is another example- Many manufacturing are increasing to provide a service and viceversa

o E.g. IKEA In Sweden, the design business Whole part of IKEA is in the manufacturing business Assembly however is done by consumers Are they design, manufacturing or retail? This is the difficulty of trying to think about businesses

rather than looking at processes

- Many follow a hybrid model so then you need to look at process by

process rather than defining a business as either manufacturing or a

service

Service Processes

Low Customer

Interaction

High Customer

Interaction

Low Labour

Intensity

Service Factory Service Shop


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High Labour

Intensity

Mass Service Prof. Service

Business Processes in Manufacturing and Services

- Services are intangible

Intangible elements E.g. Quality of what was in the hospital

o Doctoro Nurses etc.

- Manufactures are tangible

More tangible elements- Services are immediate

Can be stored online- Manufactures may be lagged

Produce stock and things might sit there in the warehouse for aperiod of time

In the car factoryo Manufacturers become more like services

- Services have direct customer involvement

Need to be consumed on the spot Some exemptions e.g. online banking

- Manufactures may have indirect customer involvement

Attributes of Product Quality

- Performance

How well does it work? Is it efficient? Does it do what is claims todo?

- Features

Features used to attract customers and differ themselves fromcompetition

Sometimes consumers will look at a particular feature- Reliability

Does it live over its life span?


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Does it operate reliably?- Conformance

Specifications (Rules, Regulations and Standards)- Durability

Expected service life? Consumers have certain expectations, does it stand up to normal

wear/tear and use

Warranty- Serviceability

Cost of servicing the product Can it be self-serviced Or does the cost money and needs to be taken to a professional

- Aesthetics What does it look/feel like Sometimes the design element is very important

o Usually the main thing we are thinking about- Perceived Quality

Fit for use? Exceeding expectations (High-quality) Low-cost product where quality is very low

Attributes of Service Quality

- Tangibles

Services we can touch and feel?o Are the seats in lecture theatres comfy

- Reliability

e.g. Train services, are they on time These are measured

- Responsiveness

Does it respond to individual needs and requirements? E.g. Lawyer should prepare case in their defence and tailor to

suit their needs

- Assurance of Quality

Competenceo Do the people who provide the service know what theyre

doing


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Quality Philosophies 5/27/2012 3:41:00 PM

- Quality is a discipline

With theory Tells us something about role and purpose of organisations

o What they should be doing and how they should bestructured

Developing a business model and strategy for success Looking internally within the firm; how to do business better Give ideas of organizational design at the operational level

o Job designo Empowerment of employeeso Theory of employee motivation and change

Has institutions around ito National bodieso Aus Quality Council

Developing regulations, policies and a standardso International standardization organizationo Broader bodies such as Universities to teach this practice

Broader approach to what business is.

The Evolution of Quality Concepts

- How have quality systems evolved in manufacturing and services?

- What are the main principles of quality management?

- Who have been the important thinkers influencing the development of

quality concepts?

Changes on how we look at it contributes to the fact it is a discipline

Traditional View

- Productivity & quality are conflicting goals

Trade off, more money= better quality Consistence with conformance approach More that you inspect and test, the better quality you have =

more expenditure


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- Quality is defined as conformance

Now there are market based views and theory- Quality is measured by non-conformance

internal measure nothing to do about customer perception

- Quality is achieved through inspection

- Defects are allowed if minimum standards are met

Only aim at minimum standards- Quality is a separate function

Hire some engineers in specialise in stat methods who are incharge of quality

- Supplier relations are short-term and cost led

Current View

- Productivity gains are made via quality improvements

affects everybody in an organisation body theory how orgs work and set of practices underpinning it Aim not to gain defects = increase productivity Increase capacity in machines Costs are less Labour isnt spent rectifying defects Has a net benefit

- Quality is the satisfaction of customer needs

Relationship b/w quality and market- Quality is measured via continuous improvement

Notion of quality changes in long-term How do you continuously improve to reach these standards

- Quality is designed in and controlled at source

Becomes big responsibility of management to design qualitysystem in organsaiton

- Defects are prevented

rather than assessed and measured- Quality is everyone's responsibility

not a specialised function- Supplier relationships are long-term and quality led

reliability, delivery etc.


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Routes to Improvement

- Cost reduction route, making improvements to eliminate costs

- Market-based route, use quality to improve competitive position (Top 2

squares)

Eight Principles of Quality

- People work in a system. Managers must work on the system to

improve it

Quality is not responsibility of individuals Divide into common causes and special causes 85% due to a common cause; responsibility of management to

identify and eliminate (issues in system, poor design)

15% was due to unique set of circumstances (human error andindividuals)

- All systems exhibit variability and this must be controlled

Always variability in systemo Point is to have a narrow range of variability that it

becomes insignificant

- The majority of problems are because systems are poorly designed. Few

problems are the result of worker error

- The answer to problems is designing quality into the process

Then can get rid of costs in testing and inspection

QualityImprovement

ImproveCompetitive

Position

Gain PremiumPrices

IncreaseRevenue

Increase MarketShare

IncreaseRevenue

Reduce Wastes:time, material,

equipmentReduce Costs

IncreaseRevenue


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o Scraps and reworkso Providing another service because the first one failed

- The relevant definition of quality is that of the customer

Market and customer-based- All members of an organization should contribute to improvement

Empower employees to make changes and improvements Not just responsibility of management

- Improvement must be planned and continuous

- Better quality pays

Key Quality Concepts

- Variety the mix (range) that can be produced from one process

o How many different kinds of services/ products can werollout with this process

- Variation

The small changes in the outputs of the processo Always some slight variationo Managements goal to reduce that variation so it becomes

insignificant- Variability

The frequency and range of changes that occur in the outputs ofthe process

o If we provide the service at the start of the shift its goodquality and goes down as the day progresses

o Delivery needs to also be narrowThe Theory of Quality Management

- Core Assumptions:

importance of qualityo mission to the organisation itselfo to the customer experienceo competitive success of the enterprise both internally and

externally

importance of peopleo whether in manufacturing


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o whether in serviceso understand what motivates peopleo provide training to meet requirementso invest in continuous development to continuously improve

systems in place

importance of systemso Managements job to design, monitor, redesign and

improve systems

importance of senior managemento Set the business strategy and decide how quality is

incorporated within that

o Design monitor and improve the systems- Core Practices:

process redesigno process mapping tools

use it to design, monitor and redesign process toimprove

There is a great variety of them control of variability

o How to stabilise process so outputs are consistent andreliable with small variation

management by factso How do we go about collecting and analysing that datao To find the common causes of problems, not done by

intuition

learning and continuous improvemento Orgs dont stand stillo Continuously changing, and raising standards of

performance

o All need to be engaged in some kind of learning process todevelop skills and improves systems within

o All stemmed from what customers want that should bereflected in design systems in orgs

Demings 14 points (redesign of org and employee jobs and

emphasize employee improvement)


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- Constancy of purpose

Need a mission, a goal, something they want to achieve,reflected in outcomes of customers

Understand business strategy and modelo Who are we servingo What parts, what are we trying to do them

- Continual improvement

training and developing employee skills everyone should make contribution and have knowledge of

business process

Needs a set of tools to formalise this tacit knowledge tounderstand how things operate

- Cooperation between functions

recognised bureaucratic hierarchies stop learning from happening where there are functional specialisation it stops learning

because all people see is their little bit of the process rather than

the whole

- Need to change organisational structure Teamwork

o Cross-functionalo Task forceso Improvement groupso Multifunctional teams

Carry out a whole process within the team- People need to have a view of the whole process

Jurans Quality Trilogy

- Quality planning

Have to decide which attributes of product are important andfocus on the delivery or those attributes in the design stage (also

the process of delivering that product or service)

- Quality control


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Need to have a systems And measure performance of this system

- Quality improvement

Jurans Costs of Quality

- Conceptualise how quality benefits organisations

- Cost of conformance (traditionally the only focus when determining

quality rather than looking at training people)

- This is ignoring most of the problem because most costs are non-

conformance

what does it costs internally to produce quality? Prevention

o To prevent defects Appraisals

o People who are doing the testing and checking- Cost of non-conformance

Internal failureo (these are the critical costs that need to be looked at)

External failure (what customers see)o Monetary cost, resupply the service, fix up what happenedo Non-monetary

Cost ofQuality

Cost ofConformance

PreventionCost

Appraisal Cost

Cost of Non-Conformance

InternalFailure Cost

ExternalFailure Cost

Monatery CostNon-Monatery

Cost


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Kaizen Continuous Improvement

Improve everything in the business continually Everyone takes responsibility for their process Kaizen Methods:

o Just-In-Time Supply

o Quality Circleso Total Quality Controlo Kanban

System to achieve JITo Suggestion Schemes

To make ideas and improvementso Zero Defects


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Business Process Management Tools 5/27/2012 3:41:00 PM

Management by Fact

- Understand the sources of variation in the business system

Collecting and analysing data to identify where problems are Theory of quality is all about Need to be able to measure variance and variability If you measure by common sense to fail to identify the variation

in the system

What might seem like the answer may not actually be so Understanding the real cause of things Maintenance of the DC6

o Early passenger planeo Had high rate of accidentso 6 crashes per million plying hourso People started thinking it was unsafe to flyo Industry had a problem about flying being unsafeo Industry thought they should improve maintenance of

plane to find out what was going wrongo Did it every 8000 flying hours to catch all the problems

Implicit assumption is that stuff on the plane iswearing out

o As a consequence it increased to 24 crashes per millionflying hours

o More maintenance meant more crasheso Found a set of failure modeso 98% of failures were accounted by other modeso Mode F caused 68%, infant mortality mode, it was a defect

in the manufacture of it

o As did more maintenance put new parts that were actuallyfailing

o Now days when they repair, they run it on a test bed tofind infant failures on the ground and no one is injured

Other failure modes A, Likely to fail when new andlikely to fail when they wear out


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Aesthetics? Identify the technical features

o Have to turn these things into technical features in aproduct or service

Prioritise the featureso Which are the critical ones to focus on

Evaluate the competitiono Benchmarking

Identify performance gaps Develop targets

o Target to close gaps or meet level of performance that willmeet the attributes of those consumers

Deploy priority features in the business processo Deploy them in the business process

Quality Function Deployment

- Simple tool, correlation matrix

What customer wantso In terms of attributes and rank them of importance

What the competitors are offering and if there are any gaps Set design targets and requirement

o Interpret those See the relationship these things

o What level of performance can we deliver withoutmisadvertising

o Know whether this will be less or better than thecompetition

o Tweak these things overtime Change and improve product to challenge the

competitors

- Concurrent Engineering (operational (middle) level)

Shorten product and process development timeso To introduce new products more quicklyo Redesign service processes quicklyo To close performance gapso Introduce new features to current products more quickly


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Cause & Effect Diagramso Fish, what are all the things that could contribute the this

8D Processo whats the problemo who can help uso what are the effects of the problemo Is there a quick fix we can put in place while we sort out

real roots of the problem

o what causes the problem Use data collection techniques to identify those

o what we could do to prevent this from happening again Collect more data to find the best fix Most cost-effective and provides a net benefit for

quality

o How are we going to make this happeno How will we monitor and follow up

Histograms Pareto Diagrams

o PICTURE

- Poka Yoke

Idiot-proofingo Plug can only be inserted one wayo Same idea used in electrical equipment these dayso Colour coated cables

- Deming Cycle

Plan do check act Brainstorm list of causes, test them come back and repeat Eventually youll go to the root causes of the problem

- Benchmarking

go and look at what other people are doing then benchmark ourperformance against theirs

RAM chart

How something varies overtime


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Quality and Innovation in Australia 5/27/2012 3:41:00 PM

Quality Management in Australia

Developed through joint Business-Government programs

Dates back to mid 1980s Govt. provided funding to get consults in firms to develop quality

practices and impellent quality told

o Create quality award Proactively encourage quality tools adoption and

techniques

Firms committed themselves to have more quality

Encompassed certification and TQM approaches

- Some wanted low-road approach (doing bare minimum to be certified)

to high road approach (create culture of quality within the firm use quality

as a competitive weapon by empowering employees)

Australian Quality Council (AQC)o Focus on standards and application of standards

Australian Organization for Quality (AOQ)o TQM approach in organisational culture

Certification became mandatory but TQM was discretionary

mid 1990s To win contracts with govt. for govt. business Industries stared creating standards Nations do the same HAS cap standards

o General standards such as food hygiene standardso With products been directly consumed by consumer

Firms has to certify with several standardso Govt, Industry, Customer Firms (cut down set that

suppliers need to conform to)

Broader quality approach is discretionaryCertification Issues


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Biggest group of Firms

- Companies seeking certification sought to:

Protect their market shareo It becomes mandatory to meet standards if you want to

keep doing business

Improve efficiencyo Identifying obvious wastes within their firms and eliminate

them

Be considered for tenderso Gain various forms of insurance

E.g. maritime, insure cargos on ships you need tomeet international quality standards for approval

Many have compliance officers that manage all thedifferent quality certifications

- Companies gaining certification found that there was:

Improved awareness of qualityo Because of effort involved in improving systems for

certification Improved awareness of problems

o Highlighted by auditors who looked for certificationapproval

o Management can go and work on Improved management control

o More transparency how things are done because you needto document quality systems and processes

Limits of the Certification Approach

- Non-certified companies continued to win contracts

In spite of such regulations in terms of quality certification Because they provided low-cost product Globalisation is increasing issue

o Consumer dont care about quality but rather price- Increase in paperwork


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Generate a lot of money and paperwork to document proceduresand what to do when something goes wrong

Manuals need to be generated (dense and detailed) Increase in beaurocratic ways in doing things to meet compliance

- Higher costs of compliance

Increased the costs of conformance without necessarilydecreasing the costs of non-conformance

o Didnt benefit from productivity gains through innovativethinking

o Rather focused on fixing problemso Just gaining certification had little impact on things such as

customer satisfaction, employee empowerment and keybusiness results

o Eliminate known problems rather than innovate inprocesses to improve those processes

- Quality certification requires you to document how you do things now

(existing ways to doing business)

doesnt encourage innovation for that you need to undertakecultural change to quality program

o work to improve thoseBenefits of TQM Approach (Broader Approach)

Improvements in customer satisfaction, employee morale, delivery in full

on time, productivity, cash flow and sales growth

Cash flow- very importanto Enables employees to operate in lower levels of stock and

improved process

More efficient Improve turnover hence improve cash flow

Human-centered factors critical in lifting performance

Beyond just resolution of known problems If you want innovation to improve productivity you need to

empower employees to improve processes through innovation

Training enhances quality performance


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Spending money Improve quality effort and employee skills Learn to use quality tools to make continuous improvement When taking compliance approach this doesnt matter

Trends in Quality Management in Australia

TQM is less popular ISO (International Standardisation Organisational

Standards) is more popular

Range for basic operations, sustainability of the business etc. is amore popular choice amongst firms

Can be applied to different parts/features of the businesso 1993-60% use TQM, 2000-40%

Decline in use of quality tools

1993-40%, 2000-20% Some have developed them into better programs (business

process reengineering)

Some are still new to these kinds of tools

Quality practices most implemented in Operations- least implemented in(support acitvites) HRM

Focused on frontline business process rather than supportEmployee responsibility for quality has steadily increased, as has training

1993-45% specialised Quality Dept, 2000-25%o Everyone was doing quality

1993-90% Trained, 2000-97% Less attention paid to quality as it has become part of the

standards way of doing business and is expected to happen

Tool are still important

Some have stopped using them Others have taken them for granted

o Use more advanced tools (business process reengineering)The bigger the firm the more they use these tools and techniques


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Small firms have lack or resources and people to take onspecialised roles and responsibilities to take on quality

certification

Large firms staff who are dedicated in managing qualitycertification, managing employee involvement, ideas for

innovation with other groups of employees on improvement

projects

Toyotao GOSHI teams

Comes in and helps employee work on idea forimprovement so they can implement that kind of

project

Malcolm Baldrige National Quality Award

- Many firms look at such criteria to improve quality- Event top performing firms still have areas of improvement- Those that entered the baldridge award

o Have a cite visit and be audited to find out ROI on $10001100%

o They are higher performing than those on the standards andpause ROI 177%

- Those who only seek certification dont achieve as much

Trends in Quality Management in China (Way of Comparison)

Growth in Certification

1993-14 (were certified), 1999-7447, 2004-15,854 (werecertified)

Implementation uneven (comparing to Aus of bare minimum and TQM)

JVs successful (joint venture)o It is the international Join Venture Partner who introduces

the quality standards

o This was the case with Fontera and Chinese dairies SOEs less successful (state owned enterpirses)

o Lack of commitment to quality


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o Lack of attention to improvement of quality proceduresFocus upon standards approach and certification since 1993

Both adopting these at the same time Differences in the nature of firms in the economy means

different adoption

Innovation in Australia

Weaknesses in Australias National Innovation System (focus of most

studies of innovation and public policies)

Low level of investment in new technologyo Leads to low skill, labour intensive production

Driven by the fact Aus has smaller firms and smallerproduction invest less in high technology and more in

human skill

This is most at risk in globalisation Overseas it is cheaper and factories are being

outsourced

Low level of investment in R & Do Short-term focus upon share price

Doesnt lead firm to invest in R&D because it takeslong time to pay back

o Branch office economy Try to keep it closer to H/O Subsidiary firms of overseas companies located here Branch of German company very difficult to have

R&D in aus and would rather locate it in Germany

then disseminate operations to branches (operations)

Small venture capital marketo Harder for entrepreneurs to get capital to get businesses

going

o End up in US because they can get the money there to getthe business going


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Those who developed SEEK got venture capital totake the risk on developing new business

Weaknesses in Australias National Innovation Systemo Lack of connections between R & D centres and industry

(should Improve CSIRO and Universities) that can

commercialise research and take it to market

Loss of innovations overseaso This can be controlled by the Australian Governmento CSIRO sell inventions unlicensed to overseas companies

Innovation is carried by SMEs (small and medium sizedenterprises)

Bio-medical firms Flurenza, Bionic ear at monasho Successfully commercialising innovation

Some production clusters emerging Biomedical firms in Sydney and Rhyde (in one

area)

Silicon Valley and the IT industry Helps firms to develop skilled workforce to

develop in these industries Need to partner up with other small/ medium

firms to get things done

Some networks emerging Policies do not support clusters and networks

Only individual firms Cannot apply for govt. grants hence limits

success

Australian Business Excellence Award Framework

Leadershipo How well is it at engaging and empowering employeeso Providing focus for innovation and improvement activitieso Organisational and public reasonability citizenship

Strategy & Planningo Is there a link b/w quality and innovation activities and

business strategies


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o Strategy development/ strategy employement Knowledge & Information

o How well do we mobilise internal and external informationand knowledge and make that count to innovations and

improvement

o Information and analysis People

o Empowerment of peopleo Engagement in improvement of activitieso Work systems, employee workability and satisafaction

Customer & Market Focus Innovation, Quality & Improvement

o Process management Success & Sustainability

o Distinguishes itself from the Americano Not only looking at business success (such flow and

profitably)

o Business results Employees Suppliers etc.

- Come in and asses firms to get 1000 points

Checklist Many will get the documentation and do a self-audit Widely used for that purpose 40% of firms use this criteria to understand strengths and

weaknesses of their businesses

Benefits of the ABEA

Widespread recognition of ABEA 70% Firms seeking improvement use ABEA 40% Firms using the ABEA made improvements in:

o Strategy development 50%o Staff communication (people related) 33%o Sales, productivity, profits (business outcomes) 25%


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Product Innovation5/27/2012 3:41:00 PM

Predicted:

TV wont be successful

Computer wont be successful

Digital cameras wont be successful

Apps on phones wont be successful

Great Decisions

- Telephone would use this to connect from one house ot another rather

than amplifying sound to the deaf

- Didnt think it was seriously going to be considered as a means of

communication

Importance of Innovation Hard to understand its significance until they see it in use and it

becomes established in a community in users (not even the

market place)

- Innovations may confer market dominance

Apple and its innovation People didnt demand it but thought it was good use of the

technology and people will finds ways to use them Bringing innovations to market is difficult Now we understand that we need to tap into high end users first

rather than the mass market

- Innovations mean you can charge premium prices

Now have something no one else can match or will take a whileto match

- Product innovation is exploited by first mover advantage e.g. Apple

consumer electronics Can Sony survive?

o Portable music playero Cassette Recordero But have been overtaken by smart phones, tables

computers, internet connected

o Lost advantage innovation in that industry because itmoves so fast

- Continuous Innovation leads to business sustainability


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Challenge in fast moving industries- Innovation reflects globalisation and rapid change in markets

Effect of globalisation and rapid change in markets Word about innovation disseminates more quickly More producers More opportunities to try out different things

even if it means losing large amounts of money

- Innovation reflects growth of knowledge and technology transfer

Consequences of better educated and larger populations Investment in technological developments

Requirements of Innovation

- Innovation is knowledge intensive

requires new knowledge and skillo Develop new technology and new set of skills in use of that

requires different combinations of knowledge and skill in newways

o Firms developed in 1970s mobile phone brought radiotechnology and telephone into one device

o Existing sets of knowledge that went from independentdevices to the intergration of the first mobile phone

o Innovation is now always about new knowledge Knowledge management; increased peoples focus on how we

attract, utilslie knowledge; focus of innovation is focused on

knowledge management

- Innovation is difficult to manage

early closure of product configurations may limit innovationo how much time do we let people experiment and try things

out in different techniques and domains of knowledge to

create something new?

o Are there limits in certain processes? You cannot predicthow long it will take to invent something and then widely

recognised and accepted


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Types of Innovation

- Evolutionary and Revolutionary Innovation

- A product based approach

Look at the thing thats being invented To decide whether its evolutionary or revolutionary

- Evolutionary innovation adds new features to existing products

High Design and High Performance featureso E.g. Put better colour screen on to mobile phone

Gradually improve the technology and producto Either add to the design or the performance of the product

- Evolutionary innovation extends product lifecycles

By adding the new technology You dont replace the whole product Extends over another lifecycle or two depending on the

technological generation

More controlled as innovation is much more defined

- Revolutionary innovations create new never before seen products Often based on new technologies

o Never before seen productso Higher risk; not sure whether innovation will work and if

consumers will adopt it

o New technology is not adopted by mass markets but rathersmall communities of users who are interested in that new

type of technology whether its translates to the adoption

of general market is un answered

o Under the risk of not being adopted- Revolutionary innovations may not find a market because:

Fit of products with existing networkso May not work in the social network of use

E.g. Cars were difficult to drive because poor accessto petrol

Mobile phone users; not many phone networks andthere wasnt any coverage in regional areas

Electric car; where do you go to recharge it?


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Hence use hybrid system that uses petrol andelectronic technology

Apple; where do you go the get the content? Apple created iTunes to buy music and

download it

Sometimes you need to do both if you want tobe adopted

Education of customerso Yes there are high-end users

But small group; how to convince a massive groupthat will benefit them

Why learn how to use new technology when currentseems to work fine

How do we educate what this new product does andhas a role in their life and help them o do things that

they never thought about doing before

Weather apps. Educated to use it and is much more

readily accessible rather than having to

wait to listen to the weather report.

New products or new features? High Design or High Performance features

Issues:

Fit of products with existing networks Education of customers

- Continuous and Discontinuous Innovation

A market-based approach Continuous Innovation deepens, expands and extends the

market for an existing product

o Find ways to use technology to make it more available tomore people

o In first personal computers You needed to know about programming to make

them work

No drop down menus, automatic start up etc.


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Hence the use was limited to those interested incomputers but innovation

When innovation improved software it was easier touse

The process took 20 years High end to general to common

o Mobile phones Larger and not much coverage Then had the brick phone makes calls Now smaller does a wider range of things and

cheaper

o Emails Aussie Mail

First to offer email service Only had 100 000 customers Had to dial up email company to download

emails over the telephone network

Improvement in technology and networkovercame limitations and has become part ofeveryday business

Didnt take much time- Discontinuous Innovation changes the market

Disruptive revolutionaryo Often enter the market in the emergent market segments

Early adopters; interested in new technology May take time for dissemination to broader

population

o Often based upon known technologies that are used tomeet latent needs

Existing capacities in technology that could be usedin certain ways but didnt understand how to use it

until it became more readily available to them

For mobile phones SMS


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o Put into the networks for technicians to useo German company made service available to customer for

free

Didnt anticipate it would be used extensively Assumed it would just be a nice add on but overtook

phone calls

o Technology was always there but no one knew how peoplewould use it until they were allowed to use it

o Now its expanding to receiving data Development of smart phones and apps Changed the way in which we used phones Most go out and buy Smartphones

- Open and Closed Innovation

A firm-based approach How can firms manage innovation Open innovations is outside in

o Work with supplier, customers, specialised firms Jointly develop new knowledge and technology of

doing things

o Engage high-end user groups Early adopters Make open sourced software Get feedback from the high-end users and improve

offering

Use open technological systems Expand system to expand participant Google approach

Let mobile and computer tablet manufacturers Work with them to develop online services and

products they have

o Use open technological systems- Closed Innovation is inside-out

In-house R&Do Spend a lot of money on ito Have exlusive use of ito Dont let consumers get involved in the innovation


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Give the customer what is designed for them Exclusive use of technologies

o Charging a premium price before that Apple approach

o Closed technological systemo Want to work with out products have to work with our

proprietary networks

Why MACs lost sales E.g. Printer had to be Apple

Even though competitor had better applecomputers

People began buying general computersbecause that could utilise in an interface opensystems

They werent locked in to using Apple A more classical idea of innovation

Outcomes of innovation can be ad hoc

Search Strategies

Strategy on how to utilise the knowledge (planned) Ad Hoc

o Opportunistico More open innovation systemo Dont anticipate that it is an innovation

Internalo Hiring-in

With expert knowledge and kills neededo Internal mobilisation of R&D, CI

Better internal knowledge in order to mobilise theexisting knowledge

Externalo Monitoring competitors and what they are doingo Monitoring supplierso Monitoring industry developments e.g. Industry

publications, trade fairs, etc.


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Smartphoneso Provided free training (1 hour) as they understood

consumers dont know what they are, use and understand

what they do

Similar to introducing new version of softwareo You think you can already do on old one but dont know all

the new things you could do and need

A lot of this knowledge transfer is done through social networkso Will you rely on that or extend the knowledge in increase

market

- Users often have tacit knowledge about products that can be mobilised

to drive innovation Continuous Improvement, evolutionary use feedback and

knowledge to create a revolutionary innovation

Not what we design something to do rather than how they use itrather than how you designed it to be used

o Needs to be understood what is and isnt been used toextend the market


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Process Innovation5/27/2012 3:41:00 PM

Product Innovation

- Creates forms of intellectual property (asset)

- Creates products that they could charge premium prices for

Importance of Process Innovation

- Making modifications and improvement to current processes reduce cost

and cycle time

- Using new technology to develop innovative processes to develop

To create new processes to create new business models

- Improvements in quality, reductions in costs, lead to ImprovedCompetitiveness (By itself)

e.g. Korean electronics industryo Havent invented productso Learn how to make existing products simpler more cheaply

and with better quality becoming a basis of

competitiveness

o New ways to manufacture existing produceso Important in early years of any product innovation because

it is expensive

Flat Screen TVs used to cost thousandso Now you can get them for under 1000o Companies have found ways to produce them cheaply and

reliably through process improvement

- New processes lead to the creation of new business models

e.g. New business models in the finance industryo Dominant model of retail banking

Passbook with finance, go to bank teller and transacttheir business

Very few do that because banks created: Lobby banking, suite of automatic teller

machines and a phone to do it properly

Telephone and internet banking Connecting remotely


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More efficient then monthly productionschedules from paper-based

More turn around, less holding of stock Can build to order; dont have to fill up

warehouses until its sold

- Applications of new industry specific technology

Improve processes and productivity specificallyo Radiology

Limited applications and uses Hospital Engineering research labs (scanning metal) Security screening

Digital imaging changed radiology process (X-raying)o Dont have to develop film anymoreo Just log onto web portal to look at imageso Simplify process in terms of space and peopleo Cut down waiting time for patients

Process innovation reduces timeo E.g. Time to market

Time to manufacture Customers expect things to get done more quickly

o Process is important but speed of delivery is becoming akey competitive element and process innovation allows us

to achieve that

- Process innovations are hard to patent

- Process innovations are protected by secrecy as processes are notvisible to customers or competitors

o Not visible by customers and competitorso Not aware of the innovation within the processo Only see results but cannot copy it

- Energy Companies began offering integrated power bills

One did this and other couldnt copy it Competitor thought they could do it but couldnt organise the IT

systems werent superior enough


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- Process innovation

Have to develop knowledge and skill of people to be able tomake them work because customers only see output

Cannot be reverse engineer it- New Organizational Structures

- Increased Use of Human Capital

Organization and Process Innovation

- New forms of organization Change organisational structures

o Film-based X-rays Medical offices were crucial for storage Hospitals have responded to the new technology by

reorganising offices as they play a minor part

Innovation and Human Capital

- Applications of knowledge and skills

Have to have these to apply the innovations into the systemsand make them work

Dont end up like energy company to manually redoing thingswith student to make to look like you had an innovative process

in place

People need to learn how to use new technologies People who find new ways of utilising such technology With continuous improvement of the process you can move from

one state of the process to a completely different state of the

process

- Communities of practice

learning from high-end users who are knowledgeable about thetechnologies and how we could apply them in our particular case


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Process innovation fails when they take up new technology anduse it to do the process the way that its always been done

o Instead of cheap low-tech is expensive high-tech and notefficient

Hence need to think of how to use these things differently andunderstanding what the technology can to and what that means

in terms of simplifying the process

o Less expensive and one that takes less timeMass Customisation (LOOK AT EXAMPLES) (LEVIs, pay premium that

is tailored and finished to the way they want it, and BAG company

customer involvement)

- A process Innovation

For 50 years most manufacturing firms focused on massproduction

o Large amounts at low costs Now mass produce to order hence enables personalisation of

product in the service context and personalisation of service

Personalisation of service- Enables new business strategies to emerge

Go back to how banks were able to segment their customer base- Move from supply-driven mass production to demand- driven

manufacturing

Low-Cost (reduce wastage of stock that isnt sold) or DiversifiedQuality Strategies (personalisation at a lower-cost that is more

highly customised to users needs and charge small premium)

Only make things when there is an order there for it No overproduction or warehouses full of stock

- Search for profitable performance/design driven market niches

- Once niches were too small now on a global scale is big enough to start

producing goods that are customised to these niches

Ford XRs For Territory


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- More highly customised products at slightly more than mass production

process redefines the market

Through process of segmentationo From those who want cheap standard product to those who

want to pay a bit more for something more highly

customised and personalised to their needs and

requirements

o More people can access something thats highly customisedthan could have afforded to buy luxury items

- More intensive use of human capital to support higher wages

Product design and Engineering become more importanto High value added activities are more importanto Aus automotive industry

GM is now on being able to design and develop carshere

Not made here High-skill and knowledge come and that end of the

process so focus high valuating on that end of the

process

Features of Mass Customisation

- Greater diversity of products for Niche Markets

- Customer Involvement with the firm

They can now personalise the product in ways they couldnt dobefore

- Co-creation on Products with Customers

Customers as a source of ideaso Rather than a passive user and buyer

- Flexible Production Systems

Volumeo To respond to the market since we are now demand-driven

Mixo Broader mix of stuff

Features


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o Be mindful of feature and innovate those features intocurrent products

- Reliance on Employee Skills

- Dell

Doesnt operate retail Order online and customise to the specifications that you want

Low-cost airlines

Internet to unpack bundle of services that comes with buyingaeroplane ticket and you can customise the service that you

want. Do you want food, entertainment, bag services etc.

Mass Customisation at FoA (FORD)

- Synchronous Supply involves

Co-location of supplierso Broadmeadows Supplier park

20 mins supply of parts to make individual car They are right next door to the factory

-Virtual Supply chain

Integrated systems, Air Internationalo On a computer screeno Any supplier can see what component are being made how

are they going to be fitted to make particular vehicle

- Customisation has made up-stream part of manufacturing

Other firms finish off Fords highly customised vehicles Redraws boundaries of what we think is the firm Integrate suppliers downstream on what we do Move upstream to integrate business partners and customers

into what we do

- Systems Suppliers


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Low cost commodity productions separated from high valueadded productions

o Not only do you segment customer baseo from standard at low to customised to high processo Segment manufacturing to part of the operationo Cheaper things are outsourced, customised products are

in-house and close to the customers

o As a result of globalisation for firms (includingsegmentation)

- Manufacturing Network

Performance vehicleso FPV (Ford Performance vehicles)

Do high end, high specification customised vehiclesand made in smaller qualities

We can do it unlike with Mass Production and all adifferent to tailor to individual needs

- Customer Involvemento Vehicle Personalisation

PrixCar Takes standard components off the vehicle and

puts on customised components

o More responsive to customer as we get close to them Shorten the cycle time the personalised order Collect more info more quickly on consumer trends

Process Innovation

Can lead to improved competitiveness Can lead to development of new kinds of business models

o Drives knowledge of marketplace and makes us moreresponsive


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o Are there internal mechanisms for mobilisation ofknowledge in projects, improvement activities and ay to

day work

- Design for Manufacturability

Applied more widely than manufacturing Design product and process of delivery of the product at the

same time

o What it is that we going to deliver and how we designtogether so we could achieve objectives

o Financial service or product Promise home loan approval in 24 hours but cannot

keep this promise customer wont be happy

Problems of Knowledge Management

- Control of Data and Information

Highly formalised forms that manager try to manageo Stuff you can set up a system to manage

Formalised data and information IT systems can capture the whole range of data

Changing radiology processes in hospitals IT systems facilitated faster capture and

dissemination of data about patients

- Control of Knowledge Creation Process

Knowledge creation process is undeterminedo How do you know youve innovated and cannot go any

further

o How do you know you have knowledge to a point whereyou can now create product and take to market place

o If you close the innovative creativity too early results is aless than optimal knowledge creation

o Traditional Project techniques dont help here Creation of knowledge is not sequential Captured of well knowledge


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- Failure of Project Teams

30-40 types of teamso There are internal issues

Could be rectified by training or reforming groupso Every Part of the organisation has their own agenda

Creates clashes when formulate a project team How can they work more effectively How can they work into the organisation more

effective

Forms of Knowledge Management

- Structural Models to capture tacit knowledge- Different for each firm

The Hypertext Organization (IMAGES form hierarchy to projectlayer in organisation)

http://m3ly4.blog.binusian.org/2010/03/08/hypertext-

organization/

o 2 layers of organisation: business systems, projects establish a permanent temporary organisation

Permanent way of creating and disbandingtemporary teams

These have an ongoing life because theyalways exists

To capture the knowledge to create Need to create vertical and HORIZONTAL link for

knowledge to flow

o Project groups allow horizontal knowledge sharing betweenteams (innovations) also communication the business

operation to understand need and requirements of

consumers (vertically)

o Employees move across these layers and have to beflexible in terms of work role
http://m3ly4.blog.binusian.org/2010/03/08/hypertext-organization/http://m3ly4.blog.binusian.org/2010/03/08/hypertext-organization/http://m3ly4.blog.binusian.org/2010/03/08/hypertext-organization/http://m3ly4.blog.binusian.org/2010/03/08/hypertext-organization/http://m3ly4.blog.binusian.org/2010/03/08/hypertext-organization/


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The Network Organizationo Partner up with other firms of skills that we need on a

project basis

o Network mechanisms, associations, personal exchange,joint learning teams

o Problems: How to find the party thats like the network broker Who will they trust to broker project to be done and

pick who will be involved

Knowledge hoarding and making available tothemselves

Spill over problem Information become available to competitors

Free riders Benefit from activates but dont contribute to

knowledge creation

o Brokers Need to manage these problems

TO create normative values and trust The Flat or Team-based Organization

o Self management and Internal consulting There are too many levels in the hierarchy There had become lots of downsizing including

stripping layers of hierarchy

So there is less vertical knowledge flow, spreadsmore horizontally and more quickly

Speed to market becoming all important to thesedays

Now lot of self-managing teams Manager only set goals and targets; team

works out for themselves and break down their

own functional barriers

Improving informal communication withorganisation hence informal knowledge can

move up and down


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attributes that are expected but not deliveredo create negative sentiment towards product/ serviceo Sit with conformance view of the worlds

- Satisfiers

Attributes that are sought by customers and satisfy needs Fitness for use view of the world

o Something that would do consistently and reliably whatthey want them to do and are prepared to pay for that

- Delighters

attributes tapping latent needs of customerso Needs that are not important until something stimulates

them

o Light-bulb moment; see how this can fit in into my dailylife

- Firms set up systems to collect knowledge but different kinds ofknowledge are collected about these things

o Only want to seek Dissatisfiers Look at customer complaints

Focus Satisfactiono Collect information about how satisfied they are through

various tools

Focus on delighters (informal knowledge)o Hard to collecto Idea of getting close to your customers is important

Begin to understand their latent needs, throughobservation and conversation involvement

o Its not written down; cannot formally get customers to telllatent needs

Data Collection Techniques

- Customer Surveys and Customer Feedback Cards

focus on satisfaction and dissatisfaction- Focus Groups


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satisfaction and delighters- Direct Customer Contact

Involvement with the cocreation of the producto Providing value adding services in conjunction the with

provision of the product

- Customer Complaints

DissatisfactionData Analysis Techniques

- Tree and Affinity Diagrams

- Customer Satisfaction Analysis

Satisfaction = Quality / Needs & Desires

Dont get to hear about their customers unless really annoyedand lodge a complaint

Those who focus on dissatisfaction, formal (court) complaints arethe only form of contact they really have

Most look at satisfactiono Quality is measured by attributes of product/service quality

Which ones are they looking for and which ones arebeing supplied

Not market based, all doing is collection info on existingcustomers

Dont know about competitiono Or other consumers who dont purchase product/serviceo Limiting organisationso Dont know where they fit into the marketo Why people choose themo If you look at dissatisfaction too you can look at places

from improvement and innovation

o If only satisfying the existing; not much need to innovateand improve, only time there is an opportunity is when

current customers express dissatisfaction

- Market Perceived Value Profiles


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Value = Quality / Price

rank key attributes on importance and get customers to ratethem in relation to competitors out of 100

Put against price that is charged for products Then look at value map that gives much more market

information on the way they sit compared to competition

o On or under value line the you are providing valued goodsif over then inferior quality at a higher price

o The further below the line, the higher the valuehttp://www.cval.com/images/value-map-new.gif

See where fit against competitors; see what attributescompetitive and what are uncompetitive

- Problem is that its a dynamic process

Product Life-Cycle Attributes (How they change overtime)

- Need to understand to know how to collect the knowledge aboutconsumers in a changing marketplace

- Latent (Delighters)

Customers dont appreciate full value when first bought or newto market but overtime customers become aware of them and

can extend life-cycle of the product and latent attributes become

more important

- Desired (dissatisfiers not being there) (satisfiers)

Customers not willing to pay for but might consider when lookingat a product

- Unique

Competitors dont have; goal of any innovation Can charge premium price until competition can copy attribute

- Pacing

Some important early in life-cycle and then fade or become moreimportant later
http://www.cval.com/images/value-map-new.gifhttp://www.cval.com/images/value-map-new.gifhttp://www.cval.com/images/value-map-new.gif


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At what stage to these attributes are becoming more/lessimportant

- Key (dissatisfiers if not there) (satisfiers)

customers are focused upon-Fading

Less and less important- Basic Desired (dissatisfiers not being there)

Are expected and if not there they wont even look at theproduct

The Ford Territory (Product attributes lead to innovation in

product life-cycle)

- An attempt to create something that was customisable to the needs of

different customers

Looked at general market to see what are consumers looking for Different groups Market was divided up into existing characters of vehicles

o Can we design something that can be customised intothese slots?

o Have different combinations to meet needs of consumersAttributes of Product Quality (How to translate, focus on

innovative efforts)


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- Performance Handling, Ride

People mover, SUV, needs car-like handling/ride Invest developing suspension/ steering systems make it work Speaking to consumers knows where we have to improve to

innovate on

- Features Tiered Seating, Storage Bins, Accessories

Flexibility in seating (5-7 seat) Different storage capability (wet bin for wet gear) In-car fridge

- Reliability

- Conformance- Durability

- Serviceability

- Aesthetics

- Perceived Quality Better than imported models

Why buy one of these when you can buy from a competitorStages in Value Management (RECAP)

- Conformance

First one used Conforms to specifications and competition doesnt Wont do harm and injury Focuses on dissatisfiers

- Customer Satisfaction (limited view)

Focus in 1990so Want to understand what makes them satisfied

- Market Perceived Quality and Value

Now interested in all threeo What really creates value in MP for customers (MORE THAN

SATISFACTION)

o Delighters are important- Customer Value Management (look at all three consumers)


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What customisation is all about How can it be provided and bundle it up with other services to

continue value of that product

Not just int

Documents

Managing Quality Innovation A and Knowledge Exam Revision