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Value-added Services for Your Future
An address to the American Society for Quality, Detroit Section, November 7, 2005.
By Allan J. Sayle, President Allan Sayle Associates

Part 1 -- Part 2 -- Part 3

Some shortcomings of quality programs

Quality management programs are about the survival of the firm; not survival of the quality standards. Seldom do quality directors tackle what they perceive as off-limits departments. Instead, they concentrate on low-hanging fruit and easy targets: suppliers; production etc. While such activity is important, it will no longer suffice. It is for you to persuade your CEO’s/ presidents that the QMP must extend into all areas: top line to bottom line.

Could one seriously consider a QMP or quality audit program that fails to consider decision-making as being what a company needs? Those programs must concentrate not only in eliminating avoidable costs, they must also address matters affecting corporate growth. By way of illustrating my point, consider “top line” processes in which the quality of decision-making is crucial.

Regrettably, it is only a minority of quality people who really get into sales and marketing. Yet this is where the top line results are determined. Those activities are closely tied to the business plan, the corporate strategy. What is the point of producing defect free products that cannot be sold? In such situations, the entire lot becomes a heap of defects if the items cannot be sold, regardless of how “perfect” they may be in terms of ppm et al. Consider: how many quality programs include metrics to determine the efficacy of top line activities? Yes, the Q standards advise one to ascertain what it is the customer wants and then to provide it. The presumption, though, in most programs is that the best market has been properly chosen: they do not ask how the market choice (strategy) was decided upon or whether or not the business model is appropriate for a particular market.

As examples of problems that can occur:

A recent article in Business Week (Ref. 1.) noted how major corporations now realize their traditional advertisements, that ignored the over 50’s age group, were ill-conceived. The Boomers represent a very savvy no-nonsense, wealthy group of consumers. They have more money than Gen X and Gen Y and are ready to spend it. The corporations were missing an essential growth market.

What works for America and the West might not work well in emerging nations. Apparently, Dell is learning the hard way that its direct selling model is unsuited to much of the Chinese domestic market simply because customers do not have credit cards and want always to “feel the fruit”! Direct selling via the internet or telephone is inappropriate. Retail outlets fare better. Indeed it is a market segment where HP and Lenovo apparently prosper far better than Dell, at present. India is little different. (Ref. 2.) But, could one argue that Dell’s quality program is inadequate? Not for the West, but apparently so or the Occident. From those reports, it is clear to me that overall, its QMP and auditing are inadequate for its global expansion goals.

The quality of top line processes is crucial in the global market place. One has an uneasy feeling American firms are aware of ”globalization” and their people view it only as a negative, fearsome phenomenon while failing to see how it can benefit their country or what it takes to secure foreign customers. Building up exports should become a central part of a quality management program. To do so necessitates working on both aspects of that bifurcation referred to earlier.


America exports less than10% of its economy. Consider the scope for improving matters if it pursued modern quality programs that created attractively priced quality products. That means firms must move towards programs based on value for money as defined by foreign customers. (Ref. 3.) By my estimation, boosting exports 5% of gdp would almost eradicate America’s 5% current account deficit which, if left unaddressed, may well prompt a dramatic fall in the dollar’s exchange rate.

The Economist also notes, whereas many other nations devote much of their resources to exports (e.g. Germany, Japan and China), America does the opposite. Export industries need developing and it is my view quality professionals as I define that expression could play a most vital, central and crucial role. They could make a massive contribution to the nation’s prospects. The key is to engage entire industries in vigorous, uncompromising value-added programs embracing all top to bottom line processes. If American quality professionals exerted as much effort in that direction as they do to ISO 9000, the future would indeed be rosy: for the professionals and for the nation.

At a time when the cost of borrowing is still low in comparison to previous decades, because of an inflow of foreign money, American businesses could readily finance an increase in export activity. Sadly too much of this inflow finances personal self-indulgence and especially a house price bubble. Indulgence of that kind generally has an unhappy ending. When households are inexorably increasing their debt to what I believe are unsustainable levels – which The Economist article estimates it as 13.4% of disposable income - one cannot but be anxious. (Ref. 4.) When the debt can no longer be financed domestic consumption will take a mighty hit and the economy will not have the luxurious cushion of exports to alleviate the effects of hard times. And since Americans’ household savings rates are now negative what will there be for that proverbial rainy day? Would it not then be sensible for each enterprise to immediately adjust its strategy by placing value for money at the center of a vigorous export drive? Is it not sensible for quality professionals to provide value added services and programs for such efforts?

It is essential that you understand quality in a global context. That means knowing what is a global quality management program and value for money in global terms. Do not look to ISO 9000 for substantial help. Indeed, I will repeat what I have said over the course of some years: if all you have to offer is a knowledge of that standard, or an ability to parrot out or squabble over the meaning of its content, or an ability to undertake compliance audits, you are in a commodity market that attracts little management attention and time. Your prospects are highly limited. And you will not be fit to drive forward a value-added program.

Detroit auto future:

Since I am addressing the Detroit Section of the ASQ, which is dominated by people from the auto sector, perhaps a few words are appropriate for you to urgently consider your own future in that industry and the services you should offer if you wish to prosper.

Does this case example sound familiar?

Through industrial action, the workers won the right to be paid a guaranteed wage regardless of whether or not their employer had work for them. The unions were strong and militant when necessary. However a new development in the industry reduced the skill level required and new methods meant the work could be moved to other areas where the unions did not hold sway, where people would willingly work for lower pay-rates; where taxes and levies were lower, fringe benefits were less. As companies transferred their business to them, those “new” areas thrived, the old ones rapidly losing everything. Their useless infrastructure was abandoned and decayed. After some years, it was totally redeveloped making way for new businesses, property prices soared and unemployment fell dramatically. No, I am not talking about an automotive company: such was the fate of London’s docks and its dockworkers (once totaling 30000 men) whose final strike, in 1967, hastened not halted the adoption of containerization. (Ref 5.)

You cannot defeat the laws of economics and must adjust to the times and developments.

According to Barron's:

- GM loses on almost every vehicle it sells and has a $2500 disadvantage on each one compared with Toyota's $1700 profit per vehicle.

- Only $500 of that amount is accounted for by the firm's legacy costs.

- GM's warranty costs per vehicle at $600 are twice that of Toyota. Six times that of Honda. And cost of ownership (according to Edmond's.com) of a Buick LaCrosse is $40000 over 5 years compared with $34000 for an identically priced $22000 Camry. (Ref. 6.)

When one looks at the GM mess one cannot but conclude the company's QMP is unsuited to today’s world. And one cannot be convinced it focuses on 'shareholder value'. (I do not believe it did ever since the departure of Alfred P. Sloan.) But the writing has been on the wall for years if not decades. Until it can sort out itself admonitions about quality delivered by GM to anyone will lack credibility.

So what if GM does collapse? Does that mean the end of Detroit? As just noted the end of the London docks did not herald the demise of London. And, consider how many once famous enterprises have disappeared from the Dow 30 and withered or died (Woolworth; Westinghouse; Sears and any number of railroads and steel companies.). America survived all of their “crises”. GM may well be just another and an eventual footnote in industrial history books. In fact, one is increasingly of the view that the extinction of GM may be good for America in the long run.

What is happening has happened before. Just recall the fate of the British auto industry flagship, British Leyland. GM is going down the same path with many of the same problems. Such was clear to me shortly after my arrival in America in 1996. I am not sure Ford is too different.

History repeats itself. To prepare for the future, it makes sense to look to the experience of others for lessons, guidance – and hope. The city of Detroit itself should do so.

Next: Renewal and change


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