Note: This file was downloaded from the Montgomery County (Maryland) Public Library electronic bulletin board and is presented as received. ----------------------------------------------------Business Index & ASAP------ AUTHOR(s): Feigenbaum, A.V. TITLE(s): America's new discipline: government and industry partnerships. (Transcript) Summary: Government and industry cooperation is vital to ensuring the continued productivity and quality of the United States in the global economy. Such partnerships need to be deliberately studied and implemented, as opposed to the ad hoc arrangements common in the past. Despite widespread laments about the supposed collapse of US competitiveness, the nation is very near a huge explosion of competitive discipline. This discipline stems from the lessons of the 1960s and 1970s and their failed business doctrine: that the way to succeed in business is to make services and goods quickly and cheaply, finance them cleverly and sell them quickly, and to quickly implement management ideas. The new discipline says that goods and services can be made quickly and cheaply only if they are made better, and that the best way to do this is to boost the skills and knowledge of every worker in an organization. Industrial Engineering p60(4) Oct 1992 v24 n10 DESCRIPTORS: Productivity Employee Relations Government Cooperation Macroeconomics Outlook Participative Management Management_Methodology FILM NUMBER: 67W1875 Government and industry actions and partnerships in quality and productivity that are essential in these brutal economic times for the United States and our trading nations throughout the world. We urgently need to understand and then to develop these initiatives so that they become fundamental ways of managing our organizations, not merely the loose collection of technical productivity projects and motivational quality seminars that have so often characterized our past. I spend a great deal of my time off-shore in connection with our General Systems Co. business throughout the Far East, Europe and Latin America in the inclose, hands-on way that those of you who know me also know that I cannot escape and which also characterizes my approach in our American businesses. What I see through this window on the world -- to use the apt Japanese term for such a perspective -- brings me to a very different judgment about America's economic strength than the attitudes about the free-all of America's competitiveness that are now so prevalent in this country and the lack of work ethic charges we now hear from abroad. I have instead come to the judgment and there is the potential for an enormous explosion of a new American competitive discipline emerging from the economic crucible in which industry and government have been immersed over the past decade. This discipline is based upon the rejection of a false business doctrine of the 1960's and 1970s. This doctrine has been that the way to succeed in industry is to make products and offer services quicker and cheaper, finance them cleverly, sell them hard and manage in a way that gets the ideas out of the boss' head and into the hands of the workers. The new discipline builds on a very different business doctrine that the best way to make products and services quicker and cheaper is to make them better and that the best way to manage is to encourage the abilities and know-how of everyone in the organization. This doctrine reintroduces to the American workplace what the management practices of the 1960s and 1970s overlooked or even purged; that is, the fundamental competitive strength that comes from utilizing the knowledge, skills and attitudes about the freedom to innovate, and about solving problems democratically, about the value of teamwork that the great majority of the men and women who work already bring to their job because of the basic traditions of American life. This is something the managers of the Japanese automobile and electronics transplants have quickly discovered and respected. And this doctrine rejects the casual restructuring assumptions of the 1960s and 1970s about the expendability of experienced middle managers or technical specialists. This discipline of better as the way to quicker and cheaper -- and using facts and systematic experience to accomplish this -- is still far too limited in its impact -- the decline of too many American industries continue to show no signs of leveling off. But it already is helping to strengthen our national economic posture. For example, a you no doubt know, America's manufacturing productivity in the 1980's reversed the U.S. decline of the 1960s and 1970s and moved ahead of both Japan and Germany, growing by an average of 3.4 percent a year. Less well known is that since 1986, America's manufacturing exports have risen about 90 percent, much more rapidly than those of Japan and Germany and in sharp contrast to the 25 percent growth throughout the major industrialized nations. And, in terms of innovation, Japan's Planning Agency's recent evaluation of 110 critical technologies determined that in 1991 American companies led in 43 of them, Japanese organizations in 33, while European (including German and others throughout the world) led in the remaining 34. While similar competitive data are difficult to come by in terms of government, there is no parallel anywhere in the world to the quality management pattern represented by the more than half-billion commercial aircraft passenger transits that depend upon the U.S. air traffic control system. However, while all of this is encouraging, it does not yet demonstrate an established trend for America's competitive growth, but instead America's potential for such a trend when we solve some major problems of the government and industry economic, trade, education and management policy infrastructure on which we depend. Our competitiveness continues to feel the limitations of the policies of the 1980s where America industry too often became a sandbox for financial leveraging; where there was little or no attention to the fact that Japan's favorable interest rates provided a huge advantage to Japanese productivity growth; where America's industrial capital spending became 9 percent of GNP compared with 20 percent in Japan and 13 percent in Germany; where America's government invested 1.5 percent of GNP in our infrastructure compared with 5 percent in Japan, and where America's trade policy had all the ambiguity of a log floating down one of our Massachusetts rivers with 10,000 ants, each of which thinks it is steering. Moreover, our competitiveness is restricted by an educational structure that has tended to deal with quality as a superficial series of unconnected anecdotes throughout our economics, engineering and management curricula -- not the systematic teachable body of knowledge that quality has become. And our competitive strength still is, with notable exceptions, weighed down by some persistent attitudes, which take me back more than forty years when policy makers eyes would begin to glaze over when I introduced the first edition of my Total Quality Control book because quality and productivity were--and too often still are -- viewed as a technician subjects rather than as fundamental national economic and social policy determinants and as corporate business strategic foundations. What I have been summarizing is an agenda for the objectives of the government and industry leadership partnership we must forge together. And this partnership must be enhanced by both industry and government learning from each other's individual quality and productivity initiatives. We are just in the early phases of recognizing how much value this can provide. For some broad examples, the explicit political dimension of marshaling widespread support for programs is something from which industry management can learn a great deal from government management; and the greater emphasis in industry on the administrator as a leader and manager rather than as a technical expert and professional guide is well worth further attention in government administration. There are three imperatives to bring about this competitiveness transformation we need in American. The first is to recognize that quality leadership has become crucial, not merely peripherally useful, to the industrial strength of the U.S. According to research just completely by General Systems, in the first half of 1991 nine out of 10 consumer and industrial buyers in the major international markets made quality equal to or more important than price in their purchase decisions. Our comparable estimate for the first half of 1981 was that only three to four customers out of ten thought this way and bought this way. This doubling of buyer emphasis on quality in a decade is one of the biggest changes in modern marketplace history. The reason is a fundamental social and economic change of historic proportions. In the 1990s the lifestyles of consumers and the work processes of companies now depend almost completely upon the reliable, predictable operation of products and services with little tolerance for the time and cost of any failures -- something quite different from the past. What good is a warranty to a young mother of three on a Monday morning with four loads of laundry and a defective washing machine? How can a small telemarketing company remain in business when its state-of-the-art telephone system breaks down every other day? Warranty or no warranty, an unreliable product or service breeds a customer looking for another supplier--foreign or otherwise. The second imperative is that American industry and education must become fundamentally international and that American government become more focused upon international commercial support skills. This is strategically very different from being a business that has some export divisions or being an educational institution that has some international programs or being an American embassy with a small commercial section but little trade orientation. The Commerce Department estimates that nearly three-quarters of all the products manufactured in the U.S. are now targets for strong import competition; there is every indication that these numbers will only increase. The reason is that quality competition has now gone global and America is sure to face many more Japans in the decade of the 1990s. From the perspective of General Systems Co. operations throughout the world, it is likely that nearly 100 percent of all American non-defense manufactured products will have import vulnerability this decade. This trend is not limited simply to American goods. American services are rapidly becoming similarly vulnerable. A communications satellite is indifferent whether the back office operations of a financial intermediary are in New York, Tokyo, Frankfurt, London or Paris, so long as they are competitively strong. The business impact is that, to protect their position in their home market, American companies must now be able to design, build and sell their domestic product lines and service offerings with the potential for supremacy in the international marketplace, even though there isn't yet much import competition or interest in exporting. And they must do this quickly. Muprhy's Law, internationalized, says that if you can get foreign competition today, you will get it. Operating in world leadership terms is the only way for a business to grow. This has been a very difficult strategic principle for many American companies to understand, let alone implement, but it is an essential principle for their viability, and a huge demand upon the government and industry partnerships to support this. The third imperative is to recognize that transforming an organization from a make-it-quicker-and-cheaper past to a make it better future is the single most demanding task of personal managerial and professional leadership is most organizations today. In the 1980s, the quality role of the senior manager in many organizations was to be number one cheerleader, with fireworks displays of executive speechmaking together with an emphasis upon establishing a group of quality improvement islands without bridges--what I call partial quality control. The quality role of the senior manager in the 1990s is far more important and far more performance-driven. It is to have the personal know-how to develop his organization's quality playbook and to be its quarterback on the field. This means recognizing the characteristics of the best and most successful organizations employing the competitive discipline to which his or her organization is moving and of understanding the best experience in applying the human based quality process systems technology -- because it is in fact a technology -- for achieving the necessary competitive transformation of the organization. I would like to review both of these areas for a few moments because understanding them is central to implementing the three imperatives I have been discussing. The first characteristics--there are in total six--of leading organizations practicing this strong competitive discipline -- I sometimes call it the organization's fingerprints -- is the rigorous commitment never to miss in producing the important customer results. In business terms, the strategy is that, to have both market share and profitability strength in the 1990s, you must offer essentially perfect products and services, which are nonetheless produced at much lower cost. The strategy recognizes that this very high quality requires essentially perfect work and teamwork processes throughout the entire organization built upon the human commitment, which makes this possible. Lack of this kind of leadership by some of the companies who serve today's consumer and industrial markets has led to what can best be described as a buyers' quality strike -- where products and services just plain do not move for the companies in these markets and where sales remain stubbornly low even though buyer disposable income for the products and services remains at satisfactory levels. In some service organizations today, for example, only one to two work products out of ten goes through error free without additional attention. While much of the widely publicized increase in service employment has come about through market growth, some has been created by these do-the-job-over quality problems. They have been a principal reason for the minimal productivity increase in American services. The second set of organizational fingerprints is the emphasis upon establishing stretch quality improvements goals on the basis required to assure number one competitive leadership -- never on the basis of just doing better than last year. It is powerful business medicine and it is the basic way that the leading American electronics company has become the number one marked leader even though other companies have always out-invested them. For example, in the critical area of manufacturing, where quality is the competitive factor; this company has chinned its work and teamwork processes up to the point where it now spends fewer total manufacturing hours to produce and ship an entire consumer electronic assembly than its competitors spend just to test it. The third fingerprint of competitive leaders is superior utilization and empowerment of human resources at all levels, union and non-union employees, middle management and front-line supervision. Continuous quality improvement is a basic in-line part of the job of every man and woman in the organization, not just some special projects from time to time. For example, this approach has been the key to the international competitive strength of one of the most successful American automotive component manufacturers, which now realizes several times more improvement work-hours in its basic manufacturing cost than competitors do because they have succeeded in putting the improvement responsibility deep into everyone's job in its organization. This company has also structured itself in a way that middle management can spend up to one-fifty of its time in personal leadership, helping the union and non-union people in this improvement activity. The fourth set of fingerprints that are common to competitively disciplined leaders is their emphasis on blindsiding the competition with innovative quality management process approaches that get there with better results first and then continue to pay off over a long period of years. For example, for years the competitors of one of the leading American industrial electronics companies tried to analyze the basis for its leadership through using the traditional visible-to-competition approach of tearing down its products, counting the parts, trying to recreate the production concepts and checking out the designs. All of this explained very little because it was this company's emphasis on being first in invisible-to-competition quality management processes like Just-in-Time delivery, logistics, quality cost analyses, customer service and customer measurement techniques that were really providing the basis for its leadership. By the time the competitors figured out that it was improved quality manageability that was doing it, the company was too far ahead in market share to catch. The fifth fingerprint characteristic of competitive leader organizations is their recognition that a customer who is happy with you means a six or seven times greater likelihood of return sales than a customer who is just satisfied with what you have done for him or her. Competitive experience makes very clear that market quality leadership in the 1990s is not merely measured in terms of quality defects -- zero or otherwise. It is measured in terms of the total customer perception of quality. This means that the quality of the iron, or the plastic, or the silicon, the customer receives is an important part-but a just a part-of the complete service support, billing accuracy, delivery reliability package he or she expects they are buying. In today's markets, competitive quality leadership depends upon accelerating the increase in the things gone right -- both small and large -- that buyers want, not merely reducing the things gone wrong. Automobiles that are routinely washed after a dealer service call are a major factor many customers identify in our surveys as a principal dealer service value differentiator because they assume --right or wrong -- that any responsible dealer can accomplish any technician action like emissions checks about as well as any other. And the voluntary elimination by a mobile communications company of a few dead spots on a main truckers route is one of the leading buyer value reasons customers have singled out for why they will place their return sales with that company. The sixth fingerprint of competitive discipline is the emphasis that what you measure right you manage right, and the quality of measurement is the key to the quality of management leadership today. Market share leadership in today's automobile industry continues to be shaped by effectiveness in determining customer wants a little while before the customer knows them himself or herself -- not merely by trying to react to the requirements after they have become apparent. The classic example is that the market take-off point for customer perception of the quality value of some of the Japanese cars in the American market can be precisely pinpointed to the end of the year 1979. This is when the combination of the Iranian oil shock--placing emphasis upon good automobile fuel economy --and high inflation--placing emphasis upon perceived value -- opened up market leadership for the Japanese automobiles that had been developed to be ready for these requirements even though several hundred thousand Japanese cars remained unsold earlier in that year. The Japanese automotive market share has never since stopped. This is the kind of business bet on quality that is too often ignored in management strategic analysis. This discussion of these six fingerprints brings me to what I earlier described as the transformation process to competitive discipline whose foundation is rooted in an unwavering commitment to quality leadership. It is not always easy to walk through a competively strong organization and peg the benchmarks for how it has accomplished this quality leadership. I want therefore to discuss for a few months what, as a result of many years in developing the systems technology of quality and of installing total quality systems throughout the world, our General Systems Co. experience demonstrates that there are essentially 10 basic benchmarks for total quality competitive success: * Quality is an organization-wide process -- Technical capability is not the principal quality determinant for organizations today. What differentiates the quality leaders from the quality followers is quality discipline and the reduction of corporate bureaucracy through clear quality work processes that men and women throughout the organization understand, believe in and are part of an developed in terms of world class standards. * Quality is what the customer says it is--not what an engineer or marketeer or general manager says it is. If you want to find out about your quality, go out and directly ask your customer--nobody can compress in a market research statistic the buyer frustration from a consistently unsatisfactory service. * Quality and cost are a sum, not a difference -- A 5-cents-on-the-sales-dollar competitive cost advantage, sometimes as much as 10 cents, characterizes many international business quality leaders. This is why quality cost improvement has become today's best return-on-investment organization performer. * Quality requires both individual and teamwork zealotry -- Quality is everybody's job but it will become nobody's job without a clear infrastructure that helps all the left hands work with all the right hands. * Quality is a way of managing -- Good management today can be simply summarized. It means empowering the quality knowledge, skills and attitudes of everyone in the organization to recognize that making quality right makes everything else in the organization right. * Quality and innovation are mutually dependent -- The key to successful new product and service launches is to make quality the partner of product and service development from the beginning, not the sweep-up-after mechanism for development problems. It is essential to include early on the dipsticking or buyer attitudes toward the new product of service because the customer cannot seriously tell you his likes and dislikes until he sees and uses the product -- paper studies do not do it. * Quality is an ethic -- The pursuit of excellence, deep recognition that what your are doing is right, is the strongest human emotional motivator in any organization and it is the basic driver in true quality leadership. Cold turkey quality programs with charts and speeches are never enough. * Quality requires continuous improvement -- There is not such thing as a permanent quality level. Quality is a constantly upward moving target and continuous improvement is an in-line, integral component of a quality program, not a separate activity. I think of it as the jogging and fitness discipline for organization quality leadership. * Quality is the most cost-effective least capital intensive route to productivity--Some of the world's strongest companies have blindsided their competition by concentrating on elimination of their hidden plant and organization -- that part of the organization that exists to do or fix unsatisfactory work. They have done it by changing their productivity concept from the old Frederick Taylor four letter word -- M-O-R-E -- and added on the quality leadership four letter -- G-O-O-D -- into the more good quality productivity concept. * Quality is implemented with a total system connected with customers and suppliers -- This is what makes quality leadership real in an organization -- the relentless application of the systematic methodology that makes it possible for the organization to manage its quality rather than just have it happen. You undoubtedly saw the statement by the White House last year identifying the twenty-two fundamental areas of technology that are keys to America's competitive leadership in the 1990s. One of these is systems management technology and this total quality systems area is today an area of unquestioned American leadership in this technology sector. These, then, are the 10 basic benchmarks underpinning the technology of Total Quality Control for the demanding decade of the 1990s. They make quality a way of totally focusing the organization on the competitive discipline of serving customer -- whether it be the end user or the man and woman at the next desk or work station. They make quality the organization's way of simultaneously achieving total customer satisfaction, human resource leadership and low costs. And that brings me back to the broader competitiveness issues with which I began these remarks, and to an evaluation of the impact upon America's economic welfare of the competitive discipline. The research company of General Systems has for some time been making a major study on what widespread implementation of total quality -- which is also reflected in the guidelines of the Malcolm Baldrige National Quality Award -- would have on the Gross National Product (now of course measured as the Gross Domestic Product) of the U.S. The General Systems Quality Improvement Index (Q.I.P) estimate evaluated in 1990 GNP terms, which we have converted to GDP measurements, indicates that an enhancement of approximately 7 percent in GDP would be the result. This research study -- macro in approach but solidly based upon firm micro data -- has been widely discussed and very favorably received in America's economics and financial communities and our research is now studying the 1991 GDP impact and comparative studies of the GDP impact of quality in both Japan and Germany. The studies clearly point to quality and productivity technology as one of the basic keys to America's industrial strength today. They indicate that the policy of investment in quality can be one of the best single investments in competitiveness we can make in America. We have extremely strong resources in the U.S. for implementing this kind of investment. It means the restoration of quality to a primary role in American management from the secondary role it has fallen into in some organizations. It means the redirection of technology and technology investments toward quality. It means the re-emphasis of the quality-mindedness of the American worker, the same worker who produces world leadership in telecommunications systems and aircraft and electrical products and agricultural equipment and software, and who directs the air traffic control and benefits processing that are the world's quality standard. And it means the creation of a much greater role for our colleges and universities -- particularly in the teaching of economics, or engineering and of management -- in providing strong educational support for quality, which we so urgently need in America today. A big job? Sure. A still largely undone job? Certainly. But the emergence of America's new competitive discipline provides a momentum for developing and implementing the government and industry partnerships, which are essential for accomplishing what must be done in solving the major problems of the government and industry economic, trade, education and management of policy infrastructure on which our quality and productivity strength depends. Certainly, also, the pursuit of excellence, which is the essence of all of this, leads to a greatness of spirit and action -- adding a new and higher level of satisfaction to the work of all of us who are dedicated to continuing quality improvement for sound competitive growth and higher quality standards of American life in this demanding decade of the 1990s.