Chapter 4:Strategic Quality Planning

Define the term strategy?1. The science and art of using all the forces of a nation to

execute approved plans as effectively as possible during peace or war. The science and art of military command as applied to the overall planning and conduct of large-scale combat operations.

2. A plan of action resulting from strategy or intended to accomplish a specific goal.

3. The art or skill of using stratagems in endeavors such as politics and business

Strategy and Quality Planning

Many organizations are finding that strategic quality plans and business plans are inseparable.

In order to understand the Strategic Planning, we need to understand quality statements of an organization.

The Quality Statements

Quality statements are part of strategic planning process and once developed, are occasionally reviewed and updated.

The quality statements include:Vision statementMission StatementQuality Policy

The utilization of three statements varies from organization to organization. Small organization may use only the quality policy statement.

The Quality Statements

Vision Statement :The vision statement is a short declaration what an organization aspires to be tomorrow

A vision statement, on the other hand, describes how the future will look if the organization achieves its mission.

Successful visions are timeless, inspirational, and become deeply shared within the organization, such as:

IBM’s Service Apple’s Computing for the masses Disney theme park’s the happiest place on the earth, and Polaroid’s instant photography

The Quality Statements

Mission Statement: A mission statement concerns what an organization is all about. The statement answers the questions such as: who we are, who are our customers, what do we do and how do we do it.

This statement is usually one paragraph or less in length, easy to understand, and describes the function of the organization.

It provides clear statement of purpose for employees, customers, and suppliers.

An example of mission statement is:

Ford Motor Company is a worldwide leader in automatic and automotive related products and services as well as the newer industries such as aerospace, communications, and financial services. Our mission is to improve continually our products and services to meet our customers’ needs, allowing us to prosper as a business and to provide a reasonable return on to our shareholders, the owners of our business.

Seven Steps to Strategic Planning

The process starts with the principles that quality and customer satisfaction are the center of an organization’s future. It brings together all the key stakeholders.

The strategic planning can be performed by any organization. It can be highly effective, allowing the organizations to do the right thing at the right time, every time.

There are seven steps to strategic Quality Planning:

1. Discover customer needs2. Customer positioning3. Predict the future4. Gap analysis5. Closing the gap6. Alignment7. Implementation

Seven Steps to Strategic Planning

1. Customer Needs: The first step is to discover the future needs of the customers. Who will they be? Will your customer base change? What will they want? How will they want? How will the organization meet and exceed expectations?

2. Customer Positioning: Next, the planners determine where organization wants to be in relation to the customers. Do they want to retain, reduce, or expand the customer base. Product or services with poor quality performance should be targeted for breakthrough or eliminated. The organization’s needs to concentrate its efforts on areas of excellence.

3. Predict the future: Next planners must look into their crystal balls to predict the future conditions that will affect their product or service. Demographics, economics forecasts, and technical assessments or projections are tools that help predict the future.

Seven Steps to Strategic Planning

4. Gap Analysis : This step requires the planner to identify the gaps between the current state and the future state of the organization. An analysis of the core values and concepts is an excellent technique for pinpointing gaps.

5. Closing the Gap: The plan can now be developed to close the gap by establishing goals and responsibilities. All stakeholders should be included in the development of the plan.

6. Alignment: As the plan is developed, it must be aligned with the mission, vision, and core values and concepts of the organization. Without this alignment, the plan will have little chance of success.

7. Implementation: This last step is frequently the most difficult. Resources must be allocated to collecting data, designing changes, and overcoming resistance to change. Also part of this step is the monitoring activity to ensure that progress is being made. The planning group should meet at least once a year to assess progress and take any corrective action.

Strategy and Strategic Planning Process in Business

Corporate strategy is the pattern of decisions in a company that:

1. Determines, shapes, and reveal its objectives, purposes or goals;

2. Produces the principal policies and plans for achieving these goals; and

3. Defines the business company intends to be in, and nature of economic contribution it intends to make to its share holders, employees, customers, and communities.

Prof Andrews ChristensenHarvard Business School

Strategy and Strategic Planning Process in Business

Michael Porter, the most popular writer on the subject of Strategy describes the development of competitive strategy as:

“a broad formula for how a business is going to compete, what is goals should be, and what policies will be needed to carry out those goals”

Business Definition for Competitive Advantage

A factor giving an advantage to a nation, company, group, or individual in competitive terms.

Used by Michael Porter for the title of his classic text on international corporate strategy, The Competitive Advantage of Nations (1990).

The concept of competitive advantage derives from the ideas on comparative advantage of the 19th-century economist David Ricardo.

Strategic Quality Management

The management of strategic quality planning begins from the top management. It is the job of Chairman or CEO to make ultimate decision. It cannot be delegated.

The components of strategic Planning position are: Mission (Quality Statement) Product/market scope Competitive Edge (differentiation) Supporting policies Objectives Organizational Culture

The Quality Statements

Quality Policy Statement: The quality policy is a guide for everyone in the organization as to how they should provide products and services to the customers.

It should be written by the CEO with feedback from the workforce and be approved by the quality council.

A quality policy is a requirement of ISO 9000

A simple quality policy is:

Xerox is a quality company. Quality is the basic business principle for Xerox. Quality means providing our external and internal customers with innovative products and services that fully satisfy their requirements. Quality is the job of every employee.

The Components of Strategic Planning

Product/Market Scope In terms of strategic planning, an organization needs to think,

“What am I selling and to whom am I selling”

A company does not simply sell a product or service. It sells value to a particular segment of market.

Value is what customer-not the company-says it is.

Quality is defined differently to different market segment and each company must define its market segment and customer value in that segment.

Every purchase decision is a function of price and quality. Price is generally known, but quality is in the mind of individual customer.

In today’s heightened competitive environment, a product or service

The Components of Strategic Planning

Competitive Edge (Differentiation) Competitive edge, frequently called differentiation is best explained in

chapter by Michael Porter in his landmark book Competitive advantage: Why should I buy from you?

Porter identified two generic strategies:

1. Overall cost leadership: Cost leadership requires aggressive construction of efficient-scale facilities, vigorous pursuit of cost reductions from experience, tight cost and overhead control, and cost minimization in areas like R&D, service, sales force, advertising, and so on.

2. Differentiation: Creating something that is perceived by the buyer as

unique.

The Components of Strategic Planning

Objectives Management Statesman Peter Drucker has said “A company has

but one objective: to create a customer’

Following this statement, he proceeded to popularize the concept of management by objective (MBO) and identified eight key areas for which objectives must be set:

1) Marketing2) Innovation3) Human Organization4) Financial Resources

5)5) Physical ResourcesPhysical Resources

6)6) ProductivityProductivity

7)7) Social ResponsibilitySocial Responsibility

8) Profit Requirements8) Profit Requirements

Various Approaches to view quality Quality means different to different

people. So are the approaches to address it by the businesses:

1. Marketing: Performance, features, services focus on customer concerns

2. Engineering: Specifications, Product based concerns

3. Manufacturing: Conformance to specifications, Cost reduction

Market Segmentation Quality means different to different people.

In terms of strategic quality management, this means that a firm must define that segment of the industry and the particular customer group.

The businesses thus need to define product lines, each of which is marketed to a different part of the market and each with differing quality attributes.

The Components of Strategic Planning

Supporting Policies Policies are guidelines for action and decision

making and facilitate the attainment of objectives.

Taken together, a company’s policies delineate its strategy fairly well.

Tell me your policies and I can tell your strategy.

The Components of Strategic Planning

Policy Wheel

DifferentiationMission

Objectives

DifferentiationMission

Objectives

Product Line

Researchand

Development

TargetMarket

Financeand

Control

Human Resources

Supplier Manufacturing

Distribution

Sales

Marketing

The test for consistency of supporting policies for a hypothetical firm Consistency of Supporting Policy

Functions Illustration of PoliciesTarget Market Map the industry and seek out those segments where we have the

advantage

Product line Product line breadth is confined to those products where our value chain is appropriate

Marketing Market research to be directed towards defining customer expectations

Sales Sales force hired and trained to promote our competitive edge

Distribution Select distributors that complement our quality edge

Manufacturing Invest in automation for improvement of quality and productivity

Supplier Select supplier that have applied for Baldrige Award.

Make life contracts

Human Resources

Require skill and experience level for new hires.

Partnership relations with union

Research and development

Percentage of budget devoted to quality improvement

Products designed for ease of repair

Finance Service procedure is billing activity

Financial arrangements with suppliers

The Components of Strategic Planning

Organizational Culture When organization chooses to make quality a

major competitive edge, it becomes the central issue in quality planning-form mission to supporting policies.

Therefore it is imperative to develop an organizational culture where every employee of the company have clear idea that product is customer value rather than a physical product or service.