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Home arrow Management arrow Strategic Management in the 21st Century. Corporate Strategy

QUALITY FUNCTION IN THE 21ST CENTURY

The business environment of the 21st century is vastly different from that of earlier periods. The quality function, which includes the quality initiatives, is of prime importance in determining the competitive position of the organization. It influences the strategic planning process as well as the execution of strategy. As in the past, the quality function can no longer be compartmentalized to a single department/unit but must span the entire organization. Additionally, it plays an active role in strategy formulation as opposed to just execution. Quality in both products and services is a central theme that must be considered and adhered to in developing short-term and long-term goals of the organization. Adequate representation of the quality function in the organizational structure and chain conveys an important message to all stakeholders. The senior person in charge of the quality function must have visibility at the strategic planning level with a direct report, in most cases, to the chief executive officer. As company vision and mission statements are formulated, they must reflect the strategic importance of the quality function. Accordingly, as goals and objectives are developed, appropriate metrics for quality should be incorporated. We now discuss some paradigm shifts that are taking place and their impact on the development of the quality function as well as its implementation.

Explosion in Information Technology

If there is one area of business that has experienced revolutionary changes in the current era, it is information technology. This has changed the manner in which businesses operate. The volume of data that can be accessed has increased exponentially. This has led to larger and richer sources of information that companies can utilize to strategically plan their future courses of action. Although more information can help in making informed decisions, it can also pose certain challenges.

The Ability to Decide What Information Is Useful for Long-Term Planning and What Should Be Used for Short-Term Decision Making

With the advent of the Internet and the data/information that may be accessed through it, it has become a challenge to extract that information that is relevant and constructive in charting a roadmap for the company. This information will have an impact on all of the issues shown in the outer loop of the organizational wheel in Figure 9.1. For example, information on competitors can be utilized in evaluating the relative performance of an organization. Subsidiary issues in this context could include the choice of the attributes and corresponding performance measures to be utilized. In most situations, there is more than one dimension on which performance can be compared. For example, price might be one dimension, while delivery lead time could be another. The relative competitive position of an organization may, however, be different for the various metrics. Information specific to each attribute may thus influence the action plans to be followed by the company. These may in turn influence the strategic plans, goals, and objectives as the feedback loop is completed.

Consider, for example, a company that has an efficient manufacturing operation that enables it to maintain low unit product cost. Implementation of quality initiatives may focus on methods to maintain or improve manufacturing efficiency, and the company may be ranked relatively highly on this dimension. However, suppose that in terms of delivery lead time, it has been found that transshipment time is long as products must wait on completion of production and must then follow a network of intermediate modes before arriving at the final destination. The relative position of the company on this dimension may thus be low. In analyzing information on potential alternatives with regard to distribution, it finds that it can outsource transshipment activity to a vendor, which will significantly reduce delivery lead time. This information not only will influence implementation of an existing strategy but may also impact the formulation of a revised strategy.

Another item of significance in this context is the ability to decipher critical information from among all that is available. This is a similar issue to the often used Pareto principle where the task is to identify the vital few from the trivial many. We are bombarded by data on a continual basis through a variety of media such as television, the Internet, journals, and annual reports. It is a not insignificant task to process the data and integrate it into a cohesive form that provides meaningful information. Management must have adequate processes to extract information from relevant sources. Conversion of data into information is a crucial part of this process, for strategic and tactical decision making relies on information. The depth of information requirements will depend on the level of decision making. For setting a company vision, mission, and strategic plans, macrolevel information is typically utilized. This may include information on opportunities and threats relative to the environment in which the company operates. For operational decisions, more detailed microlevel information, categorized and segmented based on the purpose of decisions, will be necessary. Such microlevel information might be that used to identify strengths and weaknesses of the organization, determine employee and organizational needs, and evaluate customer needs and the extent to which they are satisfied.

Because of the inherent complexities and interrelationships among units within an organization, it may not be feasible to come up with a quantitative model that adequately captures the relationships between inputs and outputs. This does not, however, mean that the available information cannot be utilized for decision making. The availability of newer hardware and software technologies is making it increasingly feasible to combine the available sources of data and transform them into useful knowledge. For example, artificial intelligence tools can use historical data to provide possible solutions to problems similar to those that have occurred in the past. Advances in computing power mean that what a mainframe machine could accomplish a couple of decades ago is now within the grasp of personal computers. Furthermore, advances in computer software make it feasible to analyze massive amounts of data that could not previously be handled. Algorithms have also been developed precisely to address the issues of extracting information from large databases. One tool that has emerged from this is data mining. Using such techniques allow organizations to drill down and extract patterns and trends that would otherwise be difficult to detect.

The Ability to Incorporate Data/Information on a Dynamic Basis for Decision Making

Decision making based on a static set of data is a thing of the past. With data being updated frequently and made available rapidly, it is prudent to exploit new data to revise existing information. Advances in information technology have made it possible to make information available in real time. This can be used to satisfy customer needs and improve customer satisfaction, which is vital to achieving the strategic goals of the organization. Consider, for example, the airline industry, a major service industry today. Although on-time arrival is an attribute of customer satisfaction, a related measure could be the time spent on board the aircraft prior to takeoff. On the basis of real-time information, if there is an existing backlog of flights waiting for take-off, it might be possible to delay the boarding time so as to improve this dimension of performance.

The Ability to Manage Globally Dispersed Operations

Economic necessities and shifts in demand patterns have caused organizations to become global. Companies may have suppliers and vendors in one region, manufacturers in another, and customers dispersed across multiple regions. In the past, multinational companies with locations in various continents were somewhat self-contained. A given location would have all the necessary capabilities and resources to complete required product transformations. This could be, for example, the entire processing of the product from raw materials to the finished product, or, if just producing a subcomponent. In each case, however, all necessary equipment and human resources would be available at a particular plant. As the location and quality of workforce talent have changed substantially and countries have more aggressively pursued foreign investment, geographical boundaries have changed. A medical services company processing X-rays may now obtain X-rays from customers in one country, have the results transcribed in another, and have the report ready for the customer the following day. This necessitates the ability to coordinate the various internal and outsourced activities in real time. Data transmission via Internet or cables has made this feasible, enabling the secure and efficient transmission of large volumes of data. It has also had an impact on the degree to which outsourcing firms can take advantage of and assist in the strategic delineation of core and peripheral services for service organizations. For example, the medical services company may have found it effective and profitable to outsource the transcription part of the process. The reduction in technical labor costs to perform this part of the process may have more than outweighed the costs associated with data transmission and outsourcing needed to have this completed at a vendor organization. Transcription is thus no longer a core service of the organization. Although this service still needs to be completed, the company no longer needs to retain technical talent and equipment for this task, as it is cost effective to outsource it. In a way, this also impacts the strategic focus of the organization and the quality initiatives that must be adopted to achieve customer satisfaction. For core services, for example, the medical services company processing X-rays may need to develop a set of goals to ensure the quality of the X-rays taken. In contrast, for support services, a set of quality objectives that focus on the reduction of transcription errors may be appropriate. Both, however, will be necessary to provide overall satisfaction to the customer, the patient in this situation.

The Ability to Manage Geographically Dispersed Customers and Their Dynamic Needs

To expand market share, corporations have, where feasible, had to seek customers that are not necessarily in the same geographical vicinity as the company's physical location. This requires customer information that may span the globe. Furthermore, customer needs may vary by geographic location. For instance, a company selling soft drinks globally may determine that customers in one country prefer a certain flavor compared to those in another country who have a different preference. The company will thus need to obtain aggregate data on a timely basis by country/region, yet determine forecast demand using other demographic information. Such collection of data and analyses can be supported by advances in information technology.

 
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