Organizational Transformation: Strategies for Business Excellence

Posted on Jun 25, 2025 in Industrial Design Engineering

Change Management Fundamentals

Change Management Defined

A collective term for all approaches to prepare, support, and help individuals, teams, and organizations in making organizational change. Quality improvement can be unsuccessful if change isn’t managed effectively.

Reasons for Organizational Change

  • Globalization and constant innovation of technology lead to a constantly evolving business environment.
  • Phenomena like social media and mobile adaptability revolutionize business, increasing the need for change.
  • Major and rapid organizational change is difficult because organizational structure, culture, and routines often have a persistent “imprint” of the past, making them resistant to radical change even when the environment changes rapidly.

Types of Organizational Change

  • Strategic changes: Shift direction & resources to new businesses or markets (e.g., becoming a brand owner, providing one-stop manufacturing services).
  • Technological changes: Modernization/automation of key processes (e.g., design of products, implementation of systems).
  • Structural changes: Altering the organizational framework (e.g., downsizing, de-layering, moving from functional to product structure).
  • Changing attitudes and behaviors of personnel: Through organizational development techniques (e.g., more customer focus, more teamwork).

Leading Organizational Change: 7 Steps

Step 1: Understand Continual Change

  1. Identify the need for change by systematically collecting, analyzing, and using external feedback (SWOT, QFD, Voice of Customers, Frontline staff feedback).
  2. Align change with strategy (e.g., to reduce cost, improve quality, enter new markets, increase competitiveness).

Step 2: Establish the Steering Committee

A team committed to the change and capable of making it happen. Members should have:

  • Authority
  • Expertise
  • Credibility
  • Leadership quality (encourage participation, open-minded, listens well, genuinely concerned, supportive, tolerant of mistakes, works collaboratively, stays on task).

Step 3: Anticipate Future Changes

  • Sensing trends that will generate future change (attending conferences, surveying markets, studying industry publications, attentive marketing representatives).
  • Channel information to the steering committee (reporting functions in Marketing, R&D; regular strategic planning meetings; participative media like suggestion boxes).
  • Outcome Anticipation: Consider intended positive, unintended positive, intended negative, and unintended negative outcomes (e.g., higher personnel turnover, labor union strike as unintended negative).

Step 4: Develop a Clear Change Vision

A sensible and appealing picture of the future state. Characteristics of a good Change Vision:

  • Imaginable: Conveys a clear picture.
  • Desirable: Points to a better tomorrow.
  • Feasible: Realistic and attainable.
  • Flexible: General enough for initiative in changing conditions.
  • Communicable: Explainable to an outsider.

Step 5: Communicate the Change Vision

  • Good Communication: Simple message, repeated, multiple formats/channels, collect feedback.
  • Promote a “we are in this together” attitude.
  • Ensure employees understand change is driven by market forces, not just management.
  • Involve everyone affected in planning and implementing the response.

Step 6: Implement the Change

Identify Resistance
  • Organizational Roadblocks:
    • Flat structures: Decision-making can be erratic/inconsistent; loss of key people has high impact; culture dependent on single individual.
    • Tall structures: Slower communication/decisions; filtered communications; more effort to respond; upper management out of loop; can be too bureaucratic.
  • Personal Resistance: Understand concerns of potential resisters.
    • Fear of: loss of control, uncertainty, more work.
  • Resisters or Spoilers Examples:
    • Automate production → Advocates see productivity, Resisters see job threat.
    • Employee involvement → Advocates see mental resource focus, Resisters see loss of authority.
    • Supplier partnership → Advocates see mutual benefit, Resisters see disruption.
    • Employee training → Advocates see skilled workforce, Resisters see high cost.
Apply Change Techniques
  1. Stakeholder Analysis:
    • Identify stakeholders (e.g., from SIPOC, Finance, upstream/downstream).
    • Plan to convert or enroll them; develop a communication plan.
    • Responsibility Communications Chart: Map current (X) vs. required (O) commitment levels (Supporter, Compliant, Indifferent, Uncooperative, Opposed, Hostile).
  2. Force Field Analysis:
    • Identifies driving forces (promoting change) and restraining forces (maintaining status quo/inhibiting change).
    • Goal: Reduce resistance and strengthen driving forces.
    • Steps:
      1. Define the change/goal.
      2. Brainstorm Driving Forces.
      3. Brainstorm Restraining Forces.
      4. Evaluate forces (e.g., rate 1-5, weak to strong).
      5. Review forces for flexibility/influence.
      6. Strategize: Strengthen driving forces and/or weaken restraining forces.
      7. Prioritize action steps (Hint: often easier to reduce restraining forces).
Conduct Change Actions
  • Removing structural roadblocks.
  • Enabling employees (training, counseling).
  • Confronting resisting managers/supervisors.
  • Negotiated arrangements for change.
  • Planning and generating short-term wins.
  • Eliminating unnecessary interdependencies.
Kurt Lewin’s Change Process Model
  1. Unfreezing: Unfreezing existing behavior patterns and attitudes.
    • Communicate lessons learned, weaknesses/threats, driving forces.
    • Warm up with leaders, surveys/suggestions.
  2. Movement (Changing): Moving people/practices to a new state.
    • Resource readiness, employ change agents, training (on the change & change management), project management, documentation.
    • Withdrawing old channels/means.
  3. Refreezing: Stabilizing the change to make the new state the norm.
    • Monitor outcomes, act on negative outcomes.
    • Showcase benefits, reward & recognition, after-action reviews, audits.

Step 7: Embed Change in Organizational Culture

Anchor major change in the culture so it becomes the normal way of doing business. Incorporation Strategies:

  • Showcase results.
  • More training and coaching.
  • Communicate constantly.
  • Remove resistant employees (as a last resort).
  • Set up a Change Management function.
  • Continue “antenna” function.
  • Repeat the change process when needed.

Tactics for Preparing for Change

  • Be smart and empathetic towards affected employees.
  • Take time to show management cares personally.
  • Communicate why changes are necessary, focusing on market factors (use various tools: face-to-face, newsletters, etc.).
  • Establish incentives that promote the change.

Employee Empowerment Strategies

Empowerment Defined

  • The giving or delegation of power or authority; authorization.
  • The giving of an ability; enablement or permission.

Employee Empowerment in Practice

Employees are involved not only in decision-making but also in the creative thought process preceding decision-making. They are not only involved but also empowered.

Change Management vs. Employee Empowerment

  • Change Management:
    • Top-Down approach.
    • Focus on Strategic Management.
    • Can face resistance from employees.
  • Employee Empowerment:
    • Bottom-Up approach.
    • Focus on Organizational Culture.
    • Can face resistance from managers.

Ishikawa on Quality Management Failures

Failures often stem from barriers and conflict attitudes between management and operators. Operators are often:

  • Not motivated.
  • Not developed.
  • Not coached.
  • Not equipped.
  • Not involved.

Quality Circles: Definition & Benefits

Definition: A small voluntary cell of operators sharing a common work situation, aiming to reduce problems impeding their work effectiveness.

  • Use their own efforts.
  • Select their own projects.
  • Elect their own leaders.
  • Set their own pace.
  • Require appropriate facilitation and coaching.

Benefits:

  • Direct pay-off (Cost/benefits).
  • Operator to manager dialogue.
  • Manager to manager dialogue.
  • Operator to operator dialogue.
  • A quality mindedness.
  • Personal development of participants.

Formation:

  • Start on the shop floor.
  • Base circle on training.
  • Allow the circle to form itself.
  • Do the training properly.
  • Support with required information.
  • Provide skills and experience.

Motivational Theories for Empowerment

Abraham Maslow’s Five Levels of Human Needs:

  • Self-actualization (e.g., Challenging job)
  • Esteem (e.g., Job title, Status)
  • Social/Belonging (e.g., Friends in work group)
  • Safety (e.g., Pension plan, Stability)
  • Physiological (e.g., Base salary, Shelter, Food)

Frederick Herzberg’s Two-Factor Theory:

  • Hygiene Factors: Prevent dissatisfaction but don’t motivate (e.g., Supervision, working conditions, pay, security, company policies). Absence leads to dissatisfaction.
  • Motivation Factors: Lead to satisfaction and motivate (e.g., Achievement, recognition, the work itself, responsibility, advancement). Presence leads to satisfaction.

Implementing Employee Empowerment

Delegating decision-making authority to lower levels.

  • Encouraging people to take initiative and broaden their scope.
  • Being supportive if mistakes are made.
  • Involvement that matters: Suggestions are seriously considered and followed up on (whether accepted or not).

Empowerment is key to motivation & productivity. An employee who feels valued and able to contribute is ready to help and grow. Empowerment enables personal and professional development, maximizing workplace contributions.

Create a supportive environment: Provide information, feedback, and means for employees to regulate their work.

  • Management as a role model.
  • Management as a trainer and facilitator.
  • Considering the employee’s point of view: Use tools like employee surveys.

Putting vehicles in place:

  • Training.
  • Brainstorming sessions.
  • Teamwork.
  • Development of suggestion systems (suggestion boxes, forums).
  • Recognizing the accomplishments of employees.

Job Arrangements for Motivation

  • Job Rotation: Permits employees to switch jobs within a work unit for a prescribed period. Gain experience of internal suppliers/customers; raises quality consciousness.
  • Job Enlargement: Combines tasks horizontally; employee performs a number of jobs sequentially. Employee responsible for a greater portion of the product/service, increasing potential for improvement.
  • Job Enrichment: Combines tasks vertically by adding managerial elements (planning, scheduling, inspection). Increases sense of autonomy and control over their own work.

Managerial Steps for Employee Empowerment

  • Involve others in assigning their own work.
  • Encourage others to obtain the results of their work assignments.
  • Provide an environment of cooperation and information sharing.
  • Share ownership of results.
  • Encourage others to take initiative.
  • Allow others to make decisions and solve their own problems.
  • Let others implement their ideas.
  • Recognize successes and contributors.

Inhibitors of Empowerment

  • Resistance from Employees & Unions.
  • Resistance from Managers:
    • Sense of Insecurity.
    • Conflict with personal values.
    • Lack of management training.
    • Unfavorable personality characteristics of managers.
    • Fear of exclusion of managers.
    • Barriers in organizational structure & management practices.

Process Improvement Principles & Methods

Part 1: Basics of Process Improvement

What is a Process?

The steps and decisions involved in the way work is accomplished. Examples: writing a work order, repairing a valve, ordering a part, preparing a message.

Who Owns Processes?

Process Owner: The immediate supervisor or leader who has control over the entire process from beginning to end and is ultimately responsible and accountable for its proper working. Groups of individuals usually share in and “own” the activities within a process.

What is Process Improvement?

Making things better, not just fighting fires or managing crises. Setting aside blaming people for problems/failures. Looking at how we can do our work better.

TRUE Process Improvement: Seeks to learn what causes things to happen in a process and uses this knowledge to:

  • Reduce variation.
  • Remove activities that contribute no value to the product or service.
  • Improve customer satisfaction.

Business Process Management & Challenges

Sources of Confusion and Defects (Variations): Differences in:

  • Function (e.g., Sales, Engineering, Finance)
  • Organizational structure
  • Time
  • Language/Vocabulary
  • Distance/Location

Problems in a “Jungle” (Traditional Functional Silos):

  • Difficult to optimize overall production when product paths cross many functional boundaries.
  • Processes can be slow, expensive, or fail if functional relationships aren’t clear.

Business Process Improvement (BPI) addresses this by:

  • Taking a matrix organization and project management approach.
  • Improving/optimizing the overall business outcome.
  • Using steps to plan, organize, control, analyze, and improve the process.
  • Improvement team leaders act as cross-functional project managers to bridge gaps and eliminate confusion.

Processes: Transforming Inputs to Outputs

A set of interrelated resources and activities that transform inputs into outputs with the objective of adding value.

  • Inputs: Data, options & ideas, orders, specifications, money, customer needs (from Suppliers).
  • Outputs: Products, services, remedies, designs, root causes, training (to End Customer).
  • Feedback is crucial.

SIPOC Model for Process Mapping

A high-level map of a process.

  • Supplier: Person/organization providing resources (info, materials, service) to the process.
  • Input: The information, materials, or service provided.
  • Process: The set of action steps that transforms inputs into outputs by adding customer value.
  • Output: The final product or service resulting from the process.
  • Customer: The person, process, or organization that receives the output (can be internal or external).

Key Principles:

  • Changes in Output (O) are caused by changes in Supplier (S), Input (I), or Process (P).
  • If S, I, Ps are stable, O will be stable.
  • Changing S, I, P can control O.
  • For improvement projects: O is the target (Y); Ss, Is, Ps are variables (Xs) affecting Y (Y = f(X1, X2, X3…)).
  • Customer (C) gives confirmation/feedback on improvement results.

Application: Identify internal customer requirements, pass them upstream to internal suppliers, align all internal processes to satisfy the final external customer.

Process Improvement Tactics

  1. Process inputs & outputs are monitored.
  2. Process inputs have some quantifiable measurement (including human effort/skill).
  3. Process input requirements should be stated so key measures of input quality can be controlled.
  4. Once process capabilities are known, output measures can monitor if the process remains in control.
  5. Feedback from downstream process measurement can improve an upstream process.
  6. Measurements of inputs & outputs are used to optimize the process.
  7. Planned experimentation (e.g., Design of Experiments – DoE) deals with isolating effects of variables on a process. Process Design includes eliminating sources of error.

Part 2: Process Improvement Methodology

Three Dimensions of Process Quality

For Total Quality:

  1. Effectiveness: How well the output meets customer needs.
  2. Efficiency: The ability to be effective at minimum cost.
  3. Adaptability: The ability to remain effective and efficient in the face of change.

Defining the Problem & Improvement Gap

Gap: The difference between “What is” (current results) and “What should be” (desired results). This is the “Priority Problem.”

  • Problem Statement: Clearly define the issue.
  • Measurement Target: Quantifiable goal for improvement (e.g., achieving 99.9% acceptance).
  • Problem Solving Schedule: Timeline for addressing the problem.

Distinguish between “Downstream symptom” (observed by customers) and “Upstream problem” (root causes within the process).

Understanding Variation & Improvement Targets

Problems arise from:

  • Shift of the process center (average).
  • Large variation around the center.

Process Improvement Target:

  • Reducing shift (bringing the process average to the target).
  • Reducing variation (making the process more consistent).

This leads to reducing defects/waste and increasing acceptance %.

Identifying Causes: Cause-and-Effect Diagram

Cause-and-Effect Diagram (Fishbone Diagram / Ishikawa Diagram):

  • Common categories for causes: Manpower, Method, Materials, Machines, Environment (and sometimes Measurement).
  • Isolating the most probable cause is a key step.

Problem-Solving Steps

  1. Identify problems; select one to work on.
  2. Define the problem; if large, break it down.
  3. Investigate the problem: Collect data & facts.
  4. Analyze the problem: Find all possible causes; decide which are major ones.
  5. Solve the problem: Choose from available solutions (greatest benefit for everybody). Get management approval & support. Implement.
  6. Confirm the solution: Collect more data. Was the problem fixed?
  7. Ensure problem stays fixed: Standardize, monitor.

Process Control & Preventing Recurrence

Process improvement provides keys to initiating appropriate actions. Actions: Control over output, process parameters, and upstream designing activities.

Control System: Can prevent defects or variances from recurring (e.g., Process Control Charts).

Part 3: Project Approach to Process Improvement

Project Approach & Matrix Management

Project Approach (Project Team Leaders):

  • Ensure complex processes move through functional elements properly, timely, and cost-effectively.
  • Coordinate part-time efforts of cross-functional team members.

Matrix Management: Effective in improving on-time delivery of good products by overlaying project structures on functional structures.

Project Teams for Improvement

An effective project team collectively has all necessary knowledge about the specific product/process. Team Members typically from: Process design, quality engineering, technical support, operations/production, quality control, test engineering.

May also include: Customer service, product development, supplier quality engineering, receiving inspection, depending on problem complexity.

Improvement Project Targets & Objectives

Project Targets (Impact to organization):

  • To business performance.
  • To customer satisfaction.
  • To stakeholder expectations.

Focus on issues in managing operations, making products/services, and process elements contributing to the cost of poor quality.

Improvement Objectives (SMART):

  • Specific
  • Measurable
  • Actionable (or Achievable)
  • Realistic (or Relevant)
  • Timely

Objectives should also consider:

  • The 3 process quality dimensions (Effectiveness, Efficiency, Adaptability).
  • Product cost (reduce).
  • Quality (improve).
  • Inventory (reduce).
  • Throughput (TH – increase): Units completed per time.
  • Availability (increase).
  • Cycle Time (reduce): Time from start to end of a process. (Note: If Work-In-Progress (WIP) increases and TH is constant, Cycle Time increases).

Structure of Process Improvement Organizations

To establish and sustain Continual Improvement:

  • Senior Management: Provides overall direction and commitment.
  • Steering Committee: Sets priority of projects, forms project teams, controls projects.
  • Project Teams: Carry out the improvement projects.
  • Facilitator(s): Guide and support teams and the improvement process.

Key Process Improvement Methodologies

  • Six Sigma:
    • Focuses on culture, specific problems, CEO to Janitor involvement, responsible teams.
    • Methodologies: DMAIC (Define, Measure, Analyze, Improve, Control) for existing processes; DMADV (Define, Measure, Analyze, Design, Verify) for new processes.
  • Kaizen (Continuous Improvement):
    • Methodology: PDCA (Plan, Do, Check, Act).

Business Process Reengineering (BPR)

Part 1: BPR Fundamentals

What is Business Process Reengineering?

The radical redesign of business processes to achieve dramatic improvements in performance, efficiency, and effectiveness. A strategic management approach focused on fundamentally rethinking and redesigning core business processes to achieve significant improvements.

It involves rethinking and redesigning:

  • Operating processes & organizational structure.
  • Business processes.
  • Focused on the organization’s core competencies.

Aims for dramatic improvements in critical contemporary measures like cost, quality, service & speed.

Why Reengineer? Reasons for BPR

  • Company is in bad shape & needs dramatic improvement:
    • Quality is bad, costs are high.
    • Incremental improvements (Plan-Do-Check-Act) are too slow for the magnitude of change needed.
  • Company has foresight and sees major trouble coming:
    • Recognizes a chance to renew vital processes proactively.
  • Company is in peak form, but management is ambitious & aggressive:
    • Sees reengineering as an opportunity to further improve performance.

Other specific reasons an organization might implement BPR:

  • Dissatisfied staff, high turnover.
  • High operational costs (wasted time/resources).
  • Inadequate technology making processes inefficient/obsolete.
  • Inefficient processes (redundant steps, delays).
  • Organizational growth where existing processes don’t scale.
  • Poor quality products/services failing to meet standards or customer needs.
  • Unhappy customers (complaints, refunds).

Gradual Improvement vs. Breakthrough BPR

  • Incremental Improvement: Slow, steady improvements made by existing companies (e.g., Companies B & C on the graph).
  • Breakthrough (Reengineering/Innovation): A company (e.g., Company D) enters the market or transforms itself with a significantly different and superior product or process, achieving a much higher level of customer-perceived value rapidly. BPR aims for such breakthroughs.

Part 2: BPR Methodology

BPR Stages and Steps

  1. Establish the business goals and constraints.
  2. Select the process to be improved.
  3. Create a new process.
  4. Develop the necessary systems and organization structures.
  5. Educate workers to effect the cultural change and introduce the system.

Establishing Business Goals for BPR

  • Lead Time reduction:
    • Response time to customer requests.
    • Time to market for new designs.
    • Reducing variations in delivery.
  • Quality of output.
  • Mass customization: Produce a large variety of products, in small lots, in a short timeframe.
  • Cost reduction.
  • Empowerment & enablement: Enable frontline staff in contact with customers to take quick action.

Selecting a Process for Improvement

Consider processes that are:

  • Most susceptible to successful redesign.
  • Have the greatest impact on the company’s customers.
  • Are in the biggest trouble.
  • (Often “d. All of the above”).

Creating the New Process

Value Analysis (Customer Perspective)
  • Map process steps against customer requirements.
  • Identify which steps add high value (◎ Strong relationship), some value (○), possible value (△), or no/negative value (×) to the customer.
  • Focus on strengthening high-value steps and addressing/eliminating low-value-added activities (e.g., reviewing documents, storing materials, reworking, setup).

Example: Step 5 has biggest value (strengthen), Step 2 has minimum value (consider elimination/redesign).

Single Unit vs. Batch Handling
  • Single unit handling: Can lead to shorter cycle time for the first unit, lower in-process inventory. Example: 40 min cycle time, 5 min value-adding time. Output rate = 0.025 units/min.
  • Batch handling (e.g., 10 units): Can increase overall throughput for a batch but may delay the first unit and increase idle time/inventory. Example: 157 min cycle time for 10 units, 50 min value-adding time. Output rate = 0.064 units/min.

Considerations:

  • Faster first unit delivery & lower inventory: Single unit preferred (good for customer service, time-pressing orders).
  • Higher manpower productivity/capacity or lower labor cost: Batch handling might be preferred (but consider inventory costs).
Process Mapping & Diagnosis
  1. Current Process Map: Understand the existing process (SIPOC, start/end points, interfaces, functions involved, customer involvement, strategic relevance).
  2. Future Process Map: Design the improved process.

Process Flow Diagnosis Questions:

  • Why do we do it this way? Can it be run differently to satisfy customers better (methods, sequence, timing, distance)?
  • Are non-value-adding steps necessary?
  • Is there duplication/redundancy? Delays (internal/operational)? Transportation waste? Other waste (Muda – referring to Toyota Production System’s 7 wastes)?
  • Are there control points? Should there be?
  • Problems with Man, Machine, Material?
  • Benchmark other processes for ideas.
Process Rationalization (ECRS)
  • Eliminate: Unnecessary steps, low-value-added activities. Reduce motions like searching, placing.
  • Combine: Steps duplicating another, low-value-added activities. Use both hands, perform simultaneous motions.
  • Rearrange: Inconvenient sequence of steps for better safety, efficiency, flow.
  • Simplify: Over-complicated steps, low-value-added activities. Use natural forces, special tools.
Applying IT to Process Redesign
  • Information simultaneously available in many places.
  • General staff can do specialized tasks with IT support (knowledge base, user-friendly interfaces).
  • Enables both centralization and decentralization as needed.
  • Common database for simultaneous use.
  • Parallel processing to cut throughput time.
  • Tracking for better control.
  • Enhanced communication (email, teleconferencing).

Examples of IT enabling reengineered processes (Purchasing, Sales/Operations).

Creating New Quality Processes with IT
  • Information captured and stored on databases for analysis.
  • Automation (imaging systems, CAD).
  • Simplification reduces error chances.
  • “One-stop shop” customer service via interconnected workstations.
Other Reengineering Approaches
  • Optimize: Conduct experiments on different settings.
  • Concurrent: Inspect during processing; start steps when conditions are ready (not waiting for prior step completion).
  • Material and tools position: Arrange in the same sequence as the work.
  • Off-line Preparation: Prepare things in advance to speed up the main process.

Precautions to Reengineering: Negative Interactions

  • Changes improving one operation should not create more defects in another.
  • Example: Relaxing upstream testing might cause downstream problems and decrease yields.
  • Suggestion: Improve a poor process first before automating it.

Obstacles to BPR Implementation

  • Human-computer interfaces: Can be the weakest link.
  • Data structure identity for integration: Someone has to sacrifice existing structures.
  • Different departmental objectives/priorities: Can lead to conflict.
  • Resistance from lower-level managers: May resist becoming transparent or more controlled.
  • Dislike of new reporting relationships: Can induce personal conflict.

Part 3: BPR Case Studies & Examples

Case Study: Ford Accounts Payable

Problem: Ford had 500 people in accounts payable; competitor Mazda managed with 100 (even considering size).

Old Process: Purchasing sends PO → copy to Accounts Payable (AP) → Vendor sends materials & invoice to AP → AP tallies PO, received materials, invoice → Payment. (Highly paper-based and prone to mismatches).

BPR (Invoice-less Process):

  • Purchasing order raised and updated in a database.
  • Warehouse updates materials received in the database.
  • Payment automatically made based on database match (PO & receipt) without waiting for a vendor invoice.

Result: 75% reduction in employees in the administration department.

Other BPR Example: Library & Reading

E-Book as an example of reengineering how information is accessed and consumed.

Strategic Management & Quality Excellence

Strategy Defined

A single or set of long-term plan(s) or policy(ies). May seek to: improve efficiency, control costs, add customer value, gain technical advantage, provide superior quality, or attain targeted market leadership.

Henry Mintzberg’s View:

  • An approach to use resources within the constraints of a competitive environment to achieve a set of goals.
  • A plan or course of action into the future.
  • An organization’s perspective or way of doing things.

Strategic Management & Quality Focus

Focuses on:

  • Quality as a strategic element.
  • How quality produces strategic advantage.
  • Quality strategies.
  • Strategic quality planning steps.
  • Strategy Components.

How Quality Produces Strategic Advantage

PIMS Program Findings (Profit Impact of Market Strategy):

  • “In the longer term, superior and/or improving relative quality is the most effective way for a business to grow.”
  • “Quality leads to both market expansion and gains in market share.”

Survey result implies a positive correlation between product quality and ROI.

TQM & Strategies:

  • Quality enhances an organization’s ability to gain a sustainable competitive advantage.
  • TQM is the best way to:
    • Continually improve efficiency and cut costs.
    • Continually improve product/service features that differentiate it.
    • Improve chances of becoming a market leader.

Customer Focus: A Core Strategic Element

Understanding Customer Defined Quality: Quality begins with the customer.

  • Outward Looking: Customer Focus (Top priority: Customer Satisfaction; Goal: High-quality products, continual improvement).
  • Inward Looking: Profit & Loss, ROI (Top priority: Profit Making; Goal: Productivity/Efficiency, maximizing output/minimizing input, immediate performance surge).

Profit comes from repeat customers and quality reputation attracting new customers. Involves putting employees in touch with customers and empowering them.

Communicating with Customers: Essential due to new technology, market competition, social changes, etc., leading to new customer needs or changes in priority of old needs. Requires continual communication with both external and internal customers. Ensures new products are well-received and existing products adapt to changing needs.

Voice of Customer (VOC): Systematic approach to gather and integrate customer feedback.

Quality Value / Execution Model:

  • Doing right things right: (High Value, Good Execution) Achieve objectives, learn, ensure customer satisfaction. (TARGET QUADRANT)
  • Doing right things wrong: (High Value, Poor Execution) E.g., Good product shipped late or with faulty packaging.
  • Doing wrong things right: (Low Value, Good Execution) E.g., Efficiently producing products the market doesn’t want; enforcing policies that lose customers.
  • Doing wrong things wrong: (Low Value, Poor Execution) E.g., Mis-typed memo that shouldn’t have been sent; poor efficiency collecting unused data.

Customer Driven Company Characteristics:

  • Vision, Commitment & Climate focused on the customer.
  • Alignment with customers.
  • Willingness to find and eliminate customer’s problems.
  • Effective use of customer information.
  • Reaching out to customers.
  • Competence, capability, and Empowerment of employees.
  • Continuous improvement of products and processes.

Strategic Quality Planning Steps

  1. Customer Needs: Discover future needs (Who will customers be? What will they want? How to meet/exceed expectations?).
  2. Customer Positioning: Where the company wants to be in relation to customers (concentrate on excellence, target poor performing products/services for breakthrough or elimination).
  3. Predict the Future: Use demographics, economic forecasts, technical assessments.
  4. Gap Analysis: Identify the gap between the current state and the desired future state.
  5. Closing the Gap: Establish goals, responsibilities, and an action plan.

Examples of Quality Strategy

  • Pursue Total Customer Satisfaction.
  • Pursue customer loyalty and retention.
  • Pursue Zero Defect.
  • Pursue World Class Performance in Quality.
  • Do It Right The First Time.
  • Reduce costs and cycle time by waste reduction (using improvement projects).
  • Work jointly with suppliers to achieve quality excellence.
  • Pursue Supply Chain Quality.

Seven Quality Management Principles (ISO)

  1. QMP 1 – Customer focus
  2. QMP 2 – Leadership
  3. QMP 3 – Engagement of people
  4. QMP 4 – Process approach
  5. QMP 5 – Improvement
  6. QMP 6 – Evidence-based decision making
  7. QMP 7 – Relationship management

Quality Goals Examples

Must be: Specific, Observable, Measurable.

Examples:

  • Reduce quality costs by 10% (Sub-goal: reduce internal failure costs by 12%).
  • Increase customer satisfaction index by 20% (Sub-goal: reduce order handling time by 10%).
  • Attain 99.99% product acceptance rate.

Deploying Quality Strategy (Hierarchy)

  • Key Strategy → Strategic Goal → Subgoal → Annual sub-goal → Projects (Project 1, 2, 3…)
  • Each project should have a description and assigned departmental responsibility.

Quality Improvement Projects: Actions

  • Enforce new inspection, testing (appraisal activities).
  • Enforce new training, systems, quality control tools (prevention activities).
  • Enforce new incentives, teamwork, quality awareness campaigns (organizational improvement).
  • Automation, IT applications (technological advance).
  • Launching new quality programs (Six Sigma, ISO 9001).

Projects should answer: Why, What, How, Who, Where, When.

Quality Strategy & Deployment Infrastructure

  • Quality Council.
  • Process/Quality Improvement Teams.
  • Performance Measurement System (Customer Satisfaction, Quality Performance, etc.).
  • Quality Audits.

Strategy Components and Tools

Strategy Components:

  • Vision: Guiding force, dream of what it wants to become, reason for being.
  • Mission: Who an organization is, what it does, where it is going.
  • Guiding Principles: Framework for pursuing the mission; summarize the value system.
  • Strategy: Approaches to ensure successful performance.
  • Strategic Goal: Translates mission into more specific, broad targets.
  • Tactics: Well-defined, finite projects/activities for specific desired outcomes supporting strategic goals.

Tool: SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats).

Strategy vs. Tactics

  • Strategy: Describes the destination and how you are going to get there.
  • Tactics: Describe the specific actions you are going to take along the way.

Strategic Planning Components & Timing

  • Direction:
    • Vision (10-20 years)
    • Mission (Open-ended)
    • Strategic focus (5 years)
    • Critical success factors (3 years)
  • Expectations (measurables):
    • Business Objectives (5-10 years)
    • Performance goals (1-5 years)
  • Action:
    • Strategies (1-5 years)
    • Tactics (1-3 years)
    • Budgets (1-3 years)
    • Performance plans (3-12 months)

Vision and Mission Examples

  • Example 1:
    • Vision: A world without barrier.
    • Mission: Our services and products connect the world.
  • Example 2:
    • Vision: Every one has a portable electronic storage device.
    • Mission: Our company supplies the best devices.

Long-Term Strategic Planning Process

  1. Develop a vision and statement of purpose.
  2. Gather data on the operating environment.
  3. Assess corporate strengths and weaknesses (SWOT).
  4. Make assumptions about external factors.
  5. Establish appropriate goals.
  6. Develop strategic and tactical steps (projects) for implementation.
  7. Run projects with Change Management.
  8. Evaluate performance to goals.
  9. Continual Review.

Building a Learning Organization

What is a Learning Organization (LO)?

An organization skilled at:

  • Creating new knowledge internally.
  • Acquiring knowledge from external sources (e.g., market, competitors, best practices) and internal experiences.
  • Transferring knowledge effectively among individuals, teams, and across the organization.

It modifies its behavior, strategies, processes, and even its culture to reflect new knowledge and insights. It doesn’t just collect information; it acts on it.

In an LO, learning is valued (seen as important), consciously managed (there are processes and responsibilities for learning), and supported (resources and encouragement are provided).

Work is viewed as a continual process of learning how to create the desired future, rather than just reacting to past events or problems.

The ultimate goal is continuous learning and transformation to adapt, innovate, and improve.

Why is Organizational Learning Necessary?

  • Avoid Stagnation/Decline: Even successful companies (like the General Motors example, which struggled without adapting) can face difficulties if they don’t learn and change.
  • Organizational Life Cycle: Organizations, like living organisms, go through phases (Birth, Youth, Midlife, Maturity). Continuous learning and renewal are crucial to avoid decline and maintain vitality, especially in mature stages.

How Do Organizations Learn?

Systems Thinking

Definition: Seeing the whole picture rather than isolated parts or events. Understanding the interrelationships and interdependencies between different elements of the organization and its environment.

Recognizing feedback loops (how actions influence subsequent conditions, which then influence further actions) and the importance of timing in actions and their consequences.

Focuses on:

  • Clear objectives and how different parts contribute.
  • Balancing long-term and short-term perspectives.
  • Understanding the interplay between functions vs. the whole company.
  • Clarity on roles and relationships.
  • Effective communication channels.
  • Systematic processes for improvement (e.g., PDCA – Plan-Do-Check-Act; DMAIC – Define-Measure-Analyze-Improve-Control).
  • Coordination, leadership, and problem-solving approached holistically.

Loop Learning

Single-Loop Learning
  • Process: Detects problems or mistakes and corrects them by relying on previous solutions or existing policies and procedures.
  • Focus: “Doing things right” – improving efficiency within the current framework.
  • Limitation: Doesn’t question the underlying assumptions or the framework itself.
Double-Loop Learning
  • Process: Corrects errors and solves problems by changing the organization’s fundamental policies, standard routines, assumptions, and norms.
  • Focus: “Doing the right things” – questioning why things are done a certain way and whether the current approach is still valid.
  • Outcome: Provides opportunities for radically different and innovative solutions. Occurs when single-loop learning is insufficient, prompting the organization to question and change its governing values.

Knowledge Management (KM)

Definition: A set of active processes and strategies that support a firm in creating, assimilating (absorbing), disseminating (sharing), and applying its knowledge.

Goal: To ensure the Right Knowledge is available at the Right Time, at the Right Place, to the right people, to enable informed decisions and actions.

Knowledge: Types & Conversion

Types of Knowledge:

  • Explicit Knowledge: Knowledge that is codified, documented, and easily transferable. Found in books, documents, reports, databases, systems, software, procedures, rules, etc.
  • Tacit Knowledge: Knowledge that resides in people’s minds; it’s personal, context-specific, and difficult to formalize, articulate, or communicate fully. Includes experience, intuition, skills, values, and attitudes.

SECI Model of Knowledge Conversion (Nonaka & Takeuchi): Describes how tacit and explicit knowledge interact and expand.

  • Socialization (Tacit → Tacit): Conversion of tacit knowledge through direct interaction and shared experiences between individuals (e.g., apprenticeships, on-the-job training (OJT), observation, imitation, brainstorming).
  • Externalization (Tacit → Explicit): The process of articulating tacit knowledge and translating it into comprehensible explicit forms that others can understand (e.g., writing reports, creating models, developing metaphors or analogies). This is often the most difficult step.
  • Combination (Explicit → Explicit): Creating new explicit knowledge from existing explicit knowledge through social processes that combine, edit, sort, and reclassify different bodies of explicit knowledge (e.g., synthesizing information from multiple reports into a new document, building a database from various sources).
  • Internalization (Explicit → Tacit): The conversion of explicit knowledge into the organization’s (and individuals’) tacit knowledge. This occurs as individuals “learn by doing,” practice, and embody explicit knowledge, making it part of their own experience and understanding.

Organizational Memory: The collective stored information from an organization’s history, including both explicit (databases, archives) and tacit (shared experiences, culture) knowledge.

Developing & Supporting a Learning Organization

Major Success Factors:

  1. Link project to economic performance: Demonstrate tangible benefits (e.g., cost savings, improved intellectual capital) to justify investment.
  2. Technical & organizational infrastructure: Provide knowledge-oriented technologies (e.g., intranets, collaborative platforms) and standardized tools (e.g., common software) for easy sharing.
  3. Standard flexible knowledge structures: Implement systems for organizing information that are consistent yet adaptable to new knowledge and needs.
  4. Knowledge-friendly culture: Foster an environment of trust, openness, and psychological safety that encourages questioning, sharing ideas (and mistakes for learning), and collaboration.
  5. Clear purpose & language: Ensure everyone understands why becoming an LO is important and shares a common vocabulary for learning and knowledge concepts.
  6. Change in motivational practices: Adapt reward and recognition systems to value and encourage learning behaviors (e.g., knowledge sharing, innovation) alongside traditional metrics.
  7. Multiple channels for knowledge transfer: Utilize various methods (formal training, intranets, informal meetings, communities of practice, expert panels) to share knowledge effectively.
  8. Senior management support: Crucial for success; leaders must visibly champion learning, lead by example, allocate resources, and communicate its importance.

Organizational Excellence Models & LO Principles

  • The Deming Prize:
    • Focus: Honors contributions to Total Quality Management (TQM) and recognizes businesses that successfully implement TQM based on Deming’s principles (customer focus, continuous improvement, employee involvement).
  • Malcolm Baldrige National Quality Award (MBNQA):
    • Focus: Recognizes U.S. organizations for performance excellence and quality achievement.
    • 7 Criteria Categories: Leadership; Strategy; Customers; Measurement, Analysis, and Knowledge Management; Workforce; Operations; and Results. (Note how KM is explicitly a category).
  • EFQM Excellence Award (European Foundation for Quality Management):
    • Focus: Recognizes European businesses demonstrating “excellent and sustainable results.”
    • Core Principles (examples): Purpose, Vision & Strategy; Organizational Culture & Leadership; Engaging Stakeholders; Creating Sustainable Value; Driving Performance & Transformation.
  • RADAR Logic (Assessment Framework):
    • Results: What the organization achieves.
    • Approach: What the organization plans to do and the reasons for it.
    • Deploy: How the approach is implemented.
    • Assess & Refine: What the organization does to monitor, learn, and improve its approach and deployment.

Newer Model Structure: Assesses based on Direction (why & what), Execution (how), and Results (what achieved).