Managing Quality Innovation A and Knowledge Exam Revision
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Transcript of 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
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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