Show Me the Money…

I am convinced that many senior business leaders are no longer excited about quality or quality improvement. At least not like they were in the 1980s and 1990s, when a lot of companies were threatened with the specter of going out of business because competitors were in their markets with better quality products at comparable prices, they believe that the ‘quality problem‘ has been solved. And in many cases, they are right, at least to a degree. The overall quality of products and services is much better now than even 15 years ago. So what gets business leaders excited? In my view, two things: innovation and improved business performance. Innovation is a key to overall business success. An organization has to continuously innovate to develop new products and services or improved ways to deliver their existing products and services to their customers in order to stay in business. Innovation is closely connected to the processes of new knowledge discovery and invention. Breakthrough innovation and incremental innovation are both critically important. Some quality tools can play a huge role in this. Designed experiments are an example. This is probably the most powerful tool in our kit when it comes to both new knowledge discovery and incremental improvement of existing products and processes. Yet, it is not nearly as widely used as it could be. By improved business performance, business leaders mean bottom-line financial results. I think one of the reasons that six-sigma has been so successful in many organizations is the project orientation with a strong focus on financial systems integration so that the results of a successful project can be visibly transmitted to the businesses’ bottom line. This plays a huge role in getting and keeping management involved and committed to the process. But, we have to do better. Most quality engineers, statisticians, and quality managers came up through the technical and engineering ranks of their organizations. When they talk to business leaders, who are not typically engineers, through the language of quality engineering, they might as well be speaking Klingon. Quality professionals need to be able to communicate in the language that the business leaders understand: money. For example, suppose that a successful lean six-sigma project reduces variability on some key product features and improves throughput in the process by 15%. This has the benefit of increasing production capacity, making the product better in some dimensions, and reducing work-in-process inventory. How much is the extra capacity worth? Can it be effectively utilized? What are the financial benefits of reduced work-in-process inventory? What customer experience will be improved through reduced variability? What is that improved customer experience worth? If these questions cannot be answered with believable numbers, your business leaders may not be at all excited about the results. You have to understand the value that these improvement projects have to the organization. Understanding the cost of quality is a step in the right direction when communicating with business leaders. But, that is really only a start. Some of the benefits of quality costs are intangible. Tying these ideas to the income statement and balance sheet is critical. Successful innovation and quality improvement can lead to improved business performance in terms of better market penetration, increased sales, higher profits, better return on assets, and better return on investment. It is critical to know how to communicate these innovations and improvements in a language other than Klingon.