THE HISTORY AND IMPORTANCE OF QUALITY (SCRIPT)

Quality has always been crucial in business. In 1887, William Cooper Procter from Procter & Gamble emphasized that creating
quality products that customers would repeatedly buy is essential for profitability. He recognized three key factors: productivity,
costs, and quality. Among these, quality is the most critical for long-term success. High-quality products build customer loyalty and
positive word-of-mouth, leading to profitability.

Restoring a tarnished quality reputation is challenging, as seen with Ford Motor Company. After climbing to the top of the
automotive industry in the 1980s through quality improvements, Ford struggled in the early 2000s with declining quality and
significant job cuts. CEO William Ford admitted they lost focus on quality and faced tough competition. However, Ford's
commitment to improving quality became a key part of its recovery strategy. As a result, they received numerous quality awards
and have fared better than other domestic car manufacturers in recent years.

The message is clear: without quality, companies struggle to sell products, make profits, and keep jobs. This chapter will explore the
history and importance of quality in business and how it fosters competitive advantage. We will also highlight companies with
outstanding quality management practices to illustrate the cultural foundations of successful organizations.

THE HISTORY AND IMPORTANCE OF QUALITY

Quality assurance is the systematic process of ensuring that products (goods and services) meet consumer expectations. It focuses
on two main areas: the design of products and the quality control during production and service delivery, often involving
measurement and inspection.

Quality assurance has a long history. For example, ancient Egyptians, around 1450 B.C., used precise measurements and consistent
building methods to ensure high-quality construction of the pyramids. (measuring rods, ropes with knots, and plumb bobs to ensure
accuracy in construction, which helped them align massive stone blocks with remarkable precision.)

Modern quality assurance began in the 12th century B.C. in China during the Zhou Dynasty. The government created specialized
departments for managing production, ensuring quality standards, and conducting inspections. These departments helped maintain
control over production processes for various goods, such as utensils and textiles, and prohibited the sale of substandard products.
Workers were responsible for checking the quality at different stages, with accountability for any defects identified.

In summary, effective quality assurance has been essential throughout history and remains vital for successful production and
consumer trust today.

The Age of Craftsmanship

During the Middle Ages, skilled workers made things by hand and checked their own work to ensure good quality. They took pride
in their craftsmanship. Groups called craft guilds were formed to train new workers and maintain high standards.
However, when the Industrial Revolution began, machines started making products in large quantities, and individual craftsmen
had less control over quality. This shift made the hands-on, careful approach to quality less common.

The Birth of Modern Quality

In the 18th century, a French gunsmith named Honoré Le Blanc came up with the idea of making musket parts that were
interchangeable, meaning they could be easily replaced if broken. This required strict quality control to ensure all parts were made
the same way.
Later, Eli Whitney brought this idea to the U.S. and used it for mass production. Although he faced difficulties, his work helped
prove that standardized production was important for making reliable products.

Early 20th Century Developments

In the early 1900s, Frederick W. Taylor introduced scientific management, which separated the planning of work from its execution.
As a result, quality control was handled mainly by inspectors who checked products after they were made, rather than ensuring
quality throughout the process. This meant that businesses focused more on producing large quantities than on maintaining high
quality.
Henry Ford improved quality by introducing efficient production methods, but it wasn't until the 1980s that U.S. companies realized
the importance of quality management. They studied Japanese manufacturing techniques and the ideas of experts like W. Edwards
Deming, who emphasized continuous quality improvement.
Meanwhile, Western Electric helped develop Statistical Quality Control (SQC), a method that used data and statistics to monitor and
improve quality in manufacturing. This innovation laid the foundation for modern quality assurance practices.

Post-World War II Quality Revolution

After World War II, the U.S. focused on mass production to meet high demand, but quality control was still handled by a few
specialists rather than being a company-wide effort.
Meanwhile, Japanese companies learned new quality management techniques from experts like Joseph Juran and W. Edwards
Deming. Instead of relying only on inspections, they made quality a key part of every step in production.
By the 1970s, Japanese products had become better and more reliable than many American-made goods. This success forced U.S.
companies to realize they were falling behind, leading them to rethink and improve their quality practices.
The U.S. "Quality Revolution"
In the 1980s, American consumers started demanding better quality products, forcing companies to focus more on quality
improvement. W. Edwards Deming and other experts helped change the way U.S. businesses thought about quality.
Companies like Xerox realized they were losing to Japanese competitors and launched major efforts to improve quality and stay
competitive.
As a result, U.S. businesses raised their quality standards, leading to important milestones like the Malcolm Baldrige National
Quality Award, which encouraged companies from different industries to focus on quality and excellence.

Conclusion
By the late 1980s to the mid-1990s, quality became a top priority in the U.S. Companies worked hard to improve, and American
manufacturers caught up with Japanese competitors in terms of quality.
Quality practices also spread beyond manufacturing into areas like services and nonprofit organizations, proving that quality is
important for success in any industry. This shift made quality management a key part of business strategy across various sectors.

Transition from Product Quality to Total Quality Management

In the 1970s, General Electric (GE) investigated how customers perceived the quality of its products. They found that product lines
with poor quality tended to overlook customer needs and focused narrowly on manufacturing specifications and defect rates. In
contrast, successful product lines prioritized customer satisfaction, employed market research, and had quality control systems
across the entire business, not just manufacturing. This shift in understanding led managers to recognize that quality is a
management discipline that encompasses all aspects of a business, not just a technical one focused solely on manufacturing.

This broader approach gave rise to the concept of Total Quality Management (TQM). TQM is defined as a comprehensive
management system that aims to continually enhance customer satisfaction while reducing costs. It involves all employees and
integrates quality into every part of the organization, from design to delivery, emphasizing learning and adaptation.

The idea of Total Quality Management (TQM) has its origins in the 1950s. A.V. Feigenbaum introduced the concept of total quality
control, which focused on improving quality across all parts of a company, not just in inspections.
The Japanese adopted this idea and developed company-wide quality control, making quality improvement a shared responsibility.
Later, the U.S. Navy coined the term TQM to describe this comprehensive approach to quality improvement, ensuring that all
departments and employees contributed to maintaining high standards.

Challenges and Criticism

In the early 1990s, many companies hurried to adopt Total Quality Management (TQM) without proper planning or strategy. As a
result, many failed to see real improvements, leading to disappointment and criticism.
Some critics even called TQM a "failed trend" because companies like Douglas Aircraft struggled to achieve the expected benefits.
Instead of a quick fix, TQM required long-term commitment and proper execution, which many organizations overlooked.

Emergence of Six Sigma

In the late 1990s, after learning from the failures of Total Quality Management (TQM), companies adopted a new approach called
Six Sigma to stay competitive. Six Sigma is a customer-focused and results-oriented approach to business improvement that
integrates many traditional quality improvement tools and techniques that have been tested and validated over the years, with a
bottom-line and strategic orientation that appeals to senior managers, thus gaining their support.
Six Sigma focuses on customer needs and improving processes to deliver better products and services. It uses tested quality
improvement tools and emphasizes measurable results, which makes it popular with senior managers. Their support helps
businesses successfully implement quality initiatives.
Over time, companies also combined Six Sigma with Lean methods from Toyota’s production system. This combination, known as
Lean Six Sigma, improves both quality and efficiency while reducing costs.

DEFINING QUALITY
Quality refers to how well a product or service meets the expectations and needs of its users. Different people and organizations
may define quality in various ways, depending on their roles and perspectives. Here are some common viewpoints:

1. Perfection: Achieving flawless performance without any defects.

2. Consistency: Delivering the same level of quality consistently over time.
3. Eliminating Waste: Reducing unnecessary resources or steps in the production process to improve efficiency.
4. Speed of Delivery: Providing products or services quickly to meet customer demands.
5. Compliance with Policies and Procedures: Adhering to established guidelines and standards to ensure quality.
6. Providing a Good, Usable Product: Creating products that are functional and meet user needs.
7. Doing It Right the First Time: Ensuring that products or services are correct without the need for rework.
8. Delighting or Pleasing Customers: Exceeding customer expectations to achieve satisfaction.
9. Total Customer Service and Satisfaction: Focusing on all aspects of customer experience to ensure overall satisfaction.

Understanding these different perspectives helps businesses appreciate the various factors that contribute to quality and how it
impacts different parts of an organization.

Quality is a concept that varies depending on one's perspective. Here are some common viewpoints:
1. Judgmental Perspective: Quality is seen as excellence or superiority. It's often subjective and recognized when experienced, like
the luxury of Ritz-Carlton hotels or Lexus cars.
2. Product-Based Perspective: Quality is defined by measurable attributes, such as the number of stitches per inch on a shirt or the
number of cylinders in an engine. Higher quantities of these attributes are often equated with higher quality.
3. User-Based Perspective: Quality is determined by how well a product or service meets the user's needs and expectations. For
example, a Cadillac CTS and a Smart car both serve different purposes and satisfy different customer needs.
4. Value-Based Perspective: Quality is the relationship between usefulness or satisfaction and price. A quality product offers the
best value, providing the desired features at a reasonable price.
5. Manufacturing-Based Perspective: Quality is defined by conformance to specifications. Products are considered quality if they
meet the design standards set by engineers and manufacturers.

Understanding these perspectives helps businesses appreciate the various factors that contribute to quality and how it impacts
different parts of an organization.

(FLOWCHART)

Quality is perceived differently depending on one's role in the production and delivery process. Here's how various perspectives
align:

1. Customer Perspective: Customers often see quality as excellence or superiority. They recognize it when they experience it, such
as enjoying a luxury hotel stay or driving a high-end car.
2. Marketing Perspective: Marketing teams focus on understanding customer needs and preferences. They define quality based on
how well a product or service meets these expectations.
3. Design and Engineering Perspective: Designers and engineers translate customer needs into specific product and process
specifications. They balance performance and cost to create products that align with marketing objectives.
4. Manufacturing Perspective: Manufacturers ensure that products are made according to design specifications. They focus on
maintaining consistency and quality during production, despite inevitable variations.

Recognizing these different perspectives helps businesses understand how quality is perceived and managed at each stage,
ensuring that the final product meets customer expectations and organizational standards.

Total Quality is a way of managing a business to make sure everything is done well and continuously improves. It is based on three
key parts:

1. Principles – These are the basic ideas or beliefs that guide the way a company works. For example, focusing on customer
satisfaction, teamwork, and continuous improvement.
2. Practices – These are the actions or steps taken to apply the principles. For example, regularly checking product quality, training
employees, and encouraging teamwork.
3. Techniques – These are the specific tools or methods used to make the practices work well. Examples include quality control
charts, customer surveys, and process improvement techniques.

All three—principles, practices, and techniques—must work together to ensure high-quality products and services.

Total Quality (TQ) is built on three main principles (comprehensive /wide,broad/, fundamental law, rule, code) that help
organizations continuously improve and deliver better products and services. Here’s a simple breakdown:

1. Customer and Stakeholder Focus

A business should always focus on making customers happy. This means understanding what they need, how they use the products,
and even what they might want in the future. Good quality is not just about reducing defects—it’s about making products and
services that truly satisfy customers.
But customers aren’t the only important people. Employees are also "internal customers" because they depend on each other to do
their jobs well. A company should also care about society by being ethical, protecting the environment, and giving back to the
community.

2. Employee Engagement and Teamwork

In the past, workers were just told what to do, and their opinions didn’t matter. Now, successful companies encourage employees
to share ideas, solve problems, and work in teams.
When employees are trusted and given freedom to make decisions, they feel more motivated and take pride in their work. Some
companies, like Marriott and Nordstrom, give their employees the power to go the extra mile for customers. For example, a
Nordstrom employee once refunded a customer for tire chains—even though the store doesn’t sell them!
Teamwork is also important. Instead of working in separate departments, employees from different areas (like design,
manufacturing, and sales) should collaborate. Companies also work closely with suppliers and partners to improve together.

3. Process Focus and Continuous Improvement

A company isn’t just a set of departments—it’s a system where different teams work together to create value. Every step in a
business, from taking an order to delivering the product, is part of a process. If one step is weak, the whole system suffers.
Instead of relying on one-time fixes, companies should always look for ways to improve. This could mean making processes more
efficient, reducing waste, or finding new ways to serve customers better.
Continuous improvement means always finding ways to do things better. This can happen in two ways
1. Small, gradual changes – Tiny improvements over time that make a big difference.
2. Big, rapid improvements – Major changes that quickly improve quality, efficiency, or customer satisfaction.
Total Quality (TQ) Practices

TQ practices are the actions companies take to ensure high-quality products and services. These practices can be grouped into six
key areas that apply to any organization:

1. Strategic Planning and Work Design – Setting goals, creating action plans, and making sure resources are used wisely to improve
quality.
Example: Deciding how to allocate budget and staff to achieve business goals.

2. Customer Engagement and Knowledge – Understanding what customers want and responding to their needs.
Example: Quickly solving customer complaints to keep them happy.

3. Workforce Management – Keeping employees motivated, satisfied, and well-trained.

Example: Collecting feedback from employees to improve their work experience.

4. Process Management – Making sure work runs smoothly from start to finish.
Example: Coordinating design, production, and delivery to avoid delays or errors.

5. Information and Knowledge Management – Using data to track performance and make better decisions.
Example: Analyzing company results to find areas for improvement.

6. Leadership – Setting the company’s vision, values, and direction.

Example: Leaders making decisions that promote quality and long-term success.

All these practices work together to help companies improve efficiency, satisfy customers, and maintain high-quality standards.

Total Quality (TQ) Techniques

TQ techniques are tools and methods that help businesses plan, track, and improve their work. These techniques help companies
collect data, analyze results, and solve problems to ensure high quality.

Examples of TQ Techniques:

 Charts and Graphs – Used to track progress and identify patterns.

Example: A chart showing fewer defects over time after workers complete a training program
 Statistical Analysis – Using numbers and data to make better decisions.
Example: Testing different product designs to see which one works best.
 Problem-Solving Tools – Methods to find and fix issues in processes.
Example: A step-by-step process to figure out why a machine keeps breaking down.

By using these techniques, companies can improve efficiency, reduce mistakes, and deliver better products and services.

Quality and Competitive Advantage

A competitive advantage means a company is better than its competitors in a way that helps it succeed in the market. A strong
competitive advantage lasts a long time and helps the company make more profits and grow.

Six Key Features of Competitive Advantage:

1. It meets customer needs better than competitors.

Example: A company offers a unique feature that customers love.
2. It helps the business succeed.
Example: A company that makes high-quality products gains loyal customers.
3. It uses the company's strengths wisely.
Example: A business with great engineers creates innovative products.
4. It is hard to copy.
Example: A company with a strong research team stays ahead by launching new products.
5. It helps the company keep improving.
Example: A business that focuses on quality keeps finding ways to do better.
6. It gives employees motivation and direction.
Example: Workers feel proud to be part of a company known for quality.

How Quality Creates Competitive Advantage:

 High-quality products make customers happy, increasing sales and loyalty.
 Companies that make premium-quality products usually lead the market.
 Quality improves a company’s profitability because customers are willing to pay more for better products.
 Focusing on quality may lower short-term profits, but long-term success is much greater.
 Well-designed products stand out from competitors, boosting a company’s reputation and market share.

In short, quality is not just about making better products—it’s a strategy for long-term success and higher profits.
(FIGURE 1.4 QUALITY AND PROFITABILITY)

How Product Quality Affects Market Value

The design and quality of a product affect how much customers value it. If a company improves the design and quality, it stands out
from competitors and builds a strong reputation.

Why Quality Design Matters:

1. Makes the product different and better than others in the market.
2. Improves the company’s reputation—customers trust and prefer high-quality brands.
3. Increases the product’s perceived value—customers see it as worth more.
4. Allows the company to charge higher prices because customers are willing to pay more for better quality.
5. Leads to a bigger market share—more customers choose the company’s product.
6. Boosts overall revenue, covering the costs of improving the product.

Bottom Line:
Investing in better product design and quality pays off by attracting more customers, allowing for higher prices, and increasing
profits in the long run.

Three Levels of Quality in an Organization

Quality is important at three levels in a company: organization level, process level, and performer level. Each level has its own focus
and responsibilities.

1. Organization Level (Big Picture - Company-Wide Focus)

At this level, the company ensures that its products and services meet customer needs and expectations. To do this, companies
must regularly ask customers:

Are you happy with our products/services?

What do you need that we don’t provide?
Are we giving you anything unnecessary?

Why this matters: The company sets goals and rewards employees based on what customers want.

2. Process Level (How Work Gets Done - Department Focus)

Each department (like marketing, product development, finance, etc.) plays a role in delivering quality. Since different departments
work together, managers need to coordinate efforts to avoid focusing only on their own department’s success at the cost of overall
company performance. They should ask:

Why this matters: Good teamwork between departments ensures smooth operations and quality service.

3. Performer Level (Individual Work - Employee Focus)

At this level, every employee's work affects quality. Employees need clear quality standards for their tasks, such as:

Why this matters: When every employee focuses on quality, the whole company benefits.

The Key Takeaway:

Top managers focus on company-wide goals.
Middle managers ensure smooth teamwork across departments.
Employees ensure their own work meets quality standards.

By working together at all three levels, a company can consistently improve quality and satisfy customers.