Using quality to gain an edge over China

The quality advantage can help India gain an edge over China and be the next economic superpower, says Elizabeth M. Keim, a global quality consultant. “To do so, Indian companies, institutes and industry bodies must function like world-class companies,” she says.

Keim, a former president and chairperson of the board of American Society for Quality, or ASQ, advises companies and bodies, such as TeliaSonera AB, Ford Motor Co., General Motors Corp., Case New Holland Global NV, Microsoft Corp., American Express Co., National Thermal Power Corp. Ltd, Federation of Indian Chambers of Commerce and Industry (Ficci), the Tata group and Bharti Airtel Ltd, in strategic quality planning and Lean Six Sigma implementation.

Keim is a Six Sigma master black belt trained at General Electric Co. , or GE, and Six Sigma Academy, US, and worked as the global commercial quality leader at GE Plastics from 1997-1999. She was responsible for worldwide implementation of Six Sigma methodology. She was in India in December as part of Ficci’s initiative for training Indian companies in quality improvement tools in association with ASQ. In an interview, Keim talks about the myths surrounding business improvement methodologies, the lack of focus on service and customer interface processes and the under-exploited potential of such tools by a majority of companies. Edited excerpts:

Tough periods are the time for improving efficiency and operational excellence. Are companies in India stepping up on business result improvement systems? What are the trends globally?

India holds the edge in quality over China in high value-added and custom-engineered products, whereas China is ahead in mass-manufactured commodities. The quality advantage can help India gain an edge over China, but to do so, Indian companies, institutes and industry bodies must function like world-class companies and aim for business excellence in all functions, processes and services.

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Improving efficiency is not optional any more and a lot of companies in India are seriously looking at improving business results. Every organization has to make the best use of resources. We see a lot of organizations looking at costs in the short term. For instance, most of them look at cutting headcount and labour costs but this does not really help in the long run because there is a limit to how much (more) people can work harder or faster.

The key is to focus on what customers want, see the reasons why that is not happening and eliminate those reasons. The idea is to cut waste at every stage, so that there’s less reworking to do, and basically focus on tasks that are useful to the organization. And trust me, every organization has some tasks that have little usefulness. Mostly, managers are afraid that jobs may be lost if these processes are improved. They often fail to see that improving systems could generate additional savings and these savings could be used for adding products or new businesses, which means more work, and thus, more jobs.

Globally too, many companies could do a better job of optimizing their businesses by applying quality methodologies in systems, processes and people. For instance, the situation that the big three American automotive companies are in is because of their short-term views and bad decisions. If you look at why General Motors Corp. and Chrysler Llc. do not have the money to survive, while Ford Motor Co. has, it is because it (Ford) has done a better job in improving operational efficiencies. The company has energy-efficient hybrid cars and also, its quality level is as good as Toyota Motor Corp.

In India, large companies, including Indian Oil Corp. Ltd, Oil and Natural Gas Corp. Ltd, Bharat Heavy Electricals Ltd, Reliance Industries Ltd, Reliance Retail Ltd and the Tata group, are working on optimizing systems and processes.

The downturn has exposed inefficiencies in staffing strategy as a number of organizations are now letting go of people. Can a Lean approach possibly help in avoiding such situations?

Lean and Six Sigma can be applied to staffing as well. These tools help in optimal use of human resources and reduce the chances of bad hiring, where either there are too many people or poor quality people working in an organization. The key to a successful organization is efficiency and improving efficiencies should be a continuous process and not something meant for tough economic times. In fact, companies such as GE, Toyota and Ford have successfully applied business improvement tools to staffing, processes, training, etc. These tools can’t protect companies from downturns or cyclical lows but they can help companies sail through tough times better than the ones not using them.

You work with clients worldwide on business result improvement through the integration of diverse methodologies such as the Malcolm Baldrige criteria for performance excellence, Triz and Lean Six Sigma. Could you briefly explain how these methodologies work?

Neither Lean nor Six Sigma alone is good enough to bring about desired results. For instance, Motorola, Inc. spent a lot of time on improving its analogue sets while the world turned digital. The same company that won the Malcolm Baldrige Quality Award in 1988 found itself fielding customer complaints.

Using one quality tool will only yield limited results and these tools work the best when used in an integrated way. Lean and Six Sigma are excellent tools to start with but if a company wants to achieve optimization across levels and become a world-class organization, then only a mix of tools can help bring about such results.

Triz—an acronym for the theory of inventive problem solving in Russian—is a knowledge and model-based technology for generating innovative ideas and solutions for problem solving.

The Malcolm Baldrige criteria comprises validated, leading-edge management practices against which an organization can measure itself. Seven categories make up the (Baldrige) criteria: leadership; strategic planning; customer and market focus; measurement, analysis and knowledge management; workforce focus; process management; and results.

Lean Six Sigma for services is a business improvement methodology that maximizes shareholder value by achieving the fastest rate of improvement in customer satisfaction, cost, quality, process speed and invested capital.

The fusion of Lean and Six Sigma improvement methods is required because Lean cannot bring a process under statistical control and Six Sigma alone cannot dramatically improve process speed or reduce invested capital. Both enable the reduction of the cost of complexity.

Does quality management yield any financial benefits? Are there ways to measure the return on investment on quality management?

Absolutely. One of the reasons why we know so much about Six Sigma is the tool’s association with Jack Welch, former CEO of GE. When Welch spoke about Six Sigma, we knew that it is one of the best tools that is tied to actual financial gains. A lot of focus of Six Sigma is on financial benefits. It helps companies avoid suboptimization and see benefits in revenues and profits. And the gain is not one-time savings but also recurring savings. One can see the methodologies delivering financial gains on an average of up to 6% savings on total revenues in the first six-eight months itself.

In three to five years, a manufacturing company can achieve savings of up to 20% to 30% on its total revenues, while the percentage of savings can go up to 30% to 40% of total revenues in the case of a services company.

Using one quality tool will only yield limited results and these tools work the best when used in an integrated way