5.Processes and strategy
5.1 Anything about strategy in ISO 9001 and ISO 9000?
ISO 9000:2015 defines strategy as:
plan to achieve a long-term or overall objective
When you remember the old article from Henry Mintzberg, The Strategy Concept I: Five Ps for Strategy, published in October 1987 by California Management Review.
Summarizing the strategy in a plan is too little, too poor.
What about ISO 9001:2015, where does the strategy come in?
Clause 4.1:
The organization shall determine external and internal issues that are relevant to its purpose and its strategic direction
Interestingly, not many people realize that relevant external and internal issues and their classification are a function of strategic orientation.
Clause 5.1.1:
ensuring that the quality policy and quality objectives are established for the quality management system and are compatible with the context and strategic direction of the organization;
OK, alignment of quality policy with context and strategic direction.
Clause 5.2.1:
is appropriate to the purpose and context of the organization and supports its strategic direction;
Again, alignment of quality policy with context and strategic direction. Quality policy should derive from strategic orientation.
Clause 9.3.1:
Top management shall review the organization’s quality management system, at planned intervals, to ensure its continuing suitability, adequacy, effectiveness and alignment with the strategic direction of the organization.
OK, this is understandable, it is peaceful.
That’s it!!!
Not very useful as a guide to work with strategy.
Let us try another door. One of the quality management principles is customer focus. ISO 9000:2015 states:
The primary focus of quality management is to meet customer requirements and to strive to exceed customer expectations.
One of the things that worries me about ISO 9001 is that it uses the language "customer" instead of "target customer".
Seth Godin in his book “We Are All Weird” writes:
"The mass market — which made average products for average people was invented by organizations that needed to keep their factories and systems running efficiently.Stop for a second and think about the backwards nature of that sentence.The factory came first. It led to the mass market. Not the other way around.”
“For a hundred years, industrialists have had a clearly stated goal: standardized workers building standardized parts”, [Another text by Seth Godin, from his blog]. This resulted, as a business model, while demand was bigger than supply. When demand is bigger than supply, the boss, the one calling the shots, is the one who produces. And when that is the case, whoever is more efficient wins. Everyone tries to compete for the lowest cost.
In this world, the competitive landscape can be compared to a single mountain and all competitors try to climb that mountain, the higher they rise, the higher the yield, but the higher they climb, the fewer the number of companies that survive, because in this landscape of a single mountain, the one that wins is the one that uses the effect of scale, grow in volume to lower unit costs and be more competitive.
As soon as supply started to exceed the level of demand, the economic world began a transformation towards more variety. In terms of the competitive landscape, this translates into many, more and more mountains. And those who climb one do not compete with those who climb the other:
In an economic world full of different peaks in a rugged landscape there are many types of customers. Different customers look and value different things.
Let us stay away from statistics and look customers in the eye, literally and metaphorically. If we look at customers who value price above all else, what satisfies them?
Satisfied customers do not happen by chance, they are the normal and natural result of work done upstream to achieve the results they value.
What do we have to do upstream to produce these results in a perfectly normal, systematic, and sustainable way?
This market is highly competitive, different competitors seek to improve their efficiency, whoever is more efficient wins, whoever stretches the frontiers of operational excellence wins.
Amateurs cannot compete with paranoid competitors.
Now, let's look at another type of customer, the one who wants tailor-made service, or a customized product. What do they value?
What kind of priorities are behind these results?
Finally, let's look at another type of customer, the one who wants innovation, or values design above all. What do they value?
Again, what kind of priorities are behind these results?
Now imagine an organization that wants to serve the three types of customers at the same time
What a big mess it will be! A typical stuck-in-the-middle situation.
The following figure is taken from an article called “Using Product Profiling to Illustrate Manufacturing-Marketing Misalignment” by Terry Hill, Rafael Menda, and David Dilts and published in July 1998.
One can look into an organization and evaluate its products and markets, its manufacturing structure, and its infrastructure.
For example, about the products and markets: organizations can have wide or narrow product ranges, high or low rate of new product introductions. High or Low frequency of schedule changes. And different order winners, the most relevant topic at the eyes of certain groups, certain segments of customers.
For example, for manufacturing: organizations can have small or large production run sizes, high or low set-up frequencies, low or high set-up costs.
For example, for infrastructure: organizations may be designed to new product introductions or for process improvements to improve efficiency. Manufacturing Managers’ tasks may be dedicated to schedules or to quantity.
Let us see two examples.
The blue company is a company that bets on innovation, they have a wide range of products, they have a high rate of new product introductions, They are flexible enough to accommodate and thrive in the middle of a high frequency of schedule changes. Customers love the innovative products and the brand. Their manufacturing is aligned by being able to run small production sizes, handle a high frequency of set-ups and their cost is low. Infrastructure is aligned with product introductions and meeting schedules.
On the other side, one can think about a green company. A company that bets on low cost to compete on price, they have a narrow range of products, they have a low rate of new product introductions. A new product introduction is a headache, is more entropy. They try to minimize the frequency of schedule changes, which reduces throughput, that reduces efficiency. Customers love their low prices. Their manufacturing is aligned by being able to run large production sizes without stop, they minimize set-ups, and their cost is high. Infrastructure is aligned with efficiency and process improvements process in and throughput.
Different organizations, different strategies, different processes, different mindsets.
Now consider the example of a third company, a company that has a weak or unclear strategy, a company not aligned.
They have a wide product range, an average rate of new product introductions, an average frequency of schedule changes, and their order winners are based on price. Things don’t fit nicely together
They run small to average production run sizes and average set-up frequency and cost.
Their mind is in searching for efficiency but at the same time, they look to meet schedules to satisfy different customers looking for different products in small quantities.
This company is a mess, is stuck in the middle trying to serve everybody and fighting with conflicting priorities.
Continue.
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