Sharing Value-Adding Ideas
leads to Better Performance

Brecker Associates periodically posts Value-adding Ideas.

Contact us for support in using these ideas to improve performance in your business or organization.

Current Value-Adding Idea

2001 No. 4

Using Simplified QFD to Prioritize Performance Improvement Actions

Businesses and organizations develop lists of customer and business needs as the basis for improving customer satisfaction and business performance. Action plans are developed for each department to take to improve performance. More often than not, each department focuses its efforts on those actions under its control, so that it can show the best results at the end of the year. Greater results can be achieved if all action plans are jointly prioritized and efforts are focused on those actions that will provide the greatest return (highest value) regardless of department or other boundaries -- the "boundaryless" focus of Jack Welch.

Quality Function Deployment (QFD) provides an excellent methodology to assess the relative impact of a list of actions on key customer requirements. The key customer and business requirements are listed on the right and prioritized according to their relative importance. This consensus list is developed by a team that includes all key contributors. This team then uses a table or matrix to evaluate the impact of specific actions (Hows) on each of these customer needs (as shown at the right).

The columns with the highest total values indicate the "Hows" with the greatest impact on customer and business requirements. Performance targets can then be established for the key "Hows".

Similar tables or matrices can be used to assess the impact of techniques or tasks within a given action plan on customer and business needs.

The consensus QFD process used to prioritize specific actions, techniques, and tasks needed to accomplish business or organizational objectives sets a clear "boundaryless" agenda for improvement. Close follow-up insures that improvement targets are achieved.

Recent Value-Adding Ideas

2001 No. 3

Utilize Human Resources in a Downturn

Cutting personnel and capital investment are the quickest ways to bolster profits in a downturn. Materials expenses vary with the level of business. But, personnel costs and fixed expenses continue and lead to reduced profits as revenues decline. Since fixed expenses are "fixed" and capital expense cuts are usually limited in size, it is tempting to reduce personnel 2-5% "across the board" in order to maintain profit levels.

Layoffs or personnel cuts are frequently counter-productive. The large "one-time charges" to account for separation costs do not cover the true costs. As stated in the Wall Street Journal on 7/23/01, additional costs may include

• hiring and training replacements when business improves
• discrimination lawsuits -- especially in selective terminations
• survivor sickness -- avoiding risks
• reduced loyalty -- good employees leave

Value creation

Employees should be evaluated on the basis of the value they contribute to the business.

• What skills (interpersonal as well as technical) are necessary for the success of the business?
• Are the employees motivated to satisfy the customer and to improve the business?
• Do they seek out value creating opportunities?
  (Since this requires taking some risks, a company history of layoffs may subvert this trait.)

Management shares responsibility for the value-created by employees. Management must clearly define the things that customers and management consider important. Employees can then align their activities with value priorities. Non-value adding tasks can be identified and eliminated.

Useful methodologies

Values must be clearly defined so that value-adding activities can be accurately assessed. Quality Function Deployment (QFD) is a fundamental tool to articulate customer values and to prioritize them. Business values (management as the customer) can also be incorporated into the value structure.

Then, the value-added for all significant activities needs to be assessed. Workplace activity surveys can be used to take a snapshot of how employees are devoting their efforts and the value obtained from those efforts. A management team then determines which activities need to be re-engineered so that greater value is obtained.

Key personnel come together in process improvement workshops to re-engineer their respective processes. Tasks with no or little value are eliminated. Quality and productivity are improved.

2001 No. 2

Storm Strategies for Small-Medium Sized Businesses

• Re-invigorate business strategies
• Investigate customer needs in more detail
• Keep innovating, but don't rush new products
• Utilize available resources to improve products and processes and thus reduce costs
• Prepare for the end of the storm

The first tendency in a downturn is to quickly reduce expenses to maintain margins. This usually means reducing outside purchased materials, such as computers and travel, and services, such as consultants and training. Reducing headcount is the other readily available source of cost savings. However, making these cost and personnel reductions too quickly and "across the board" can hinder long term growth. Reacting quickly to changing business conditions is essential for preservation, but more can be gained from focusing reductions on eliminating waste while building for the future -- a Six Sigma and Value Analysis approach.

A slack period in business is the ideal time to re-evaluate customer needs, products and services, competition, and the strategies being pursued to gain competitive advantage. Human and physical resources are readily available. Suppliers are willing to invest in (high potential) new developments -- they need to improve their business too. The marketplace is generally looking for new features, new technology, or significant cost reductions to stimulate demand. To quote Benjamin Franklin, "The early bird gets the worm."

Self-evaluation

Strategies and performance relative to

• value (product and business features)
• quality (defects and reliability)
• time to market (product development time)
• delivery time (order processing, production, and distribution cycle time)
• costs (purchase and total cost of ownership)

• customers
• markets
• competition?

Making improvements

Potential product and process improvements needed to meet strategic objectives need be identified. They should then be prioritized based on their contribution to the "bottom line." Resources should be allocated to pursue those with the greatest return. Knowledgeable cross-functional teams produce the best results. Some expenditures for materials and services may also be necessary. Returns on these expenditures will be quick, especially for process improvements. Reducing process defects leads to both lower costs and greater customer satisfaction. Reducing cycle time leads to faster product introductions and lower product / service lead times.

Commitment and follow-through are necessary to achieve the desired bottom-line results. The right people must be assigned to the improvement teams. Management and the teams must agree on and pursue appropriate prioritized projects. Follow-up is needed to insure the projects are completed on schedule and produce the anticipated results.

Improving quality systems

Another excellent use of available resources is to update an existing ISO9000 quality program to the continuous improvement requirements of ISO9000-2000. The goal of continuous improvement quality systems is a continuous reduction in total costs.

Useful methodologies

The Value methodology and Quality Function Deployment, QFD, in particular, are very useful in simply and quickly identifying and prioritizing business and customer needs. It also provides a framework for evaluating whether processes and strategies are aligned.

Six Sigma - Value Analysis Workshops bring together the cross-functional teams that identify and prioritize potential improvements. The focus of these workshops is customized to fit the business, the product / service, and the situation.

2001 No. 1

Building Customer Loyalty -- and Profits

Customer Loyalty leads to

• repeat sales
• word-of-mouth advertising (referrals)
  (accepted as the most effective form of advertising
  -- and it's free).

Successful sales personnel work to satisfy unspoken customer desires as well as stated customer requirements. They strive to "delight" the customer with the unexpected (Kano).

It is essential to identify the needs and desires that are important to key customers. Relationships are frequently as important to customers as specific product or service features. The ease of doing business and consummating the sale can also be important. Customers place their trust in suppliers to deliver high quality goods and services at the time and place at which they are required.

The hospitality industry is especially sensitive to maintaining excellent customer relations. Frequent user programs (airlines, hotels, rental cars, credit cards, etc.) were initiated to establish brand loyalty. As these programs have proliferated, companies have paid increasing attention to identifying the needs and desires of their most profitable customers in an effort to gain competitive advantage. Creativity and ingenuity are used to develop ways to delight their customers.

An outstanding current example is British Airways introduction of the sleeper seat in Business Class. The "short night" and early morning arrival of west-to-east trans-oceanic flights makes sleep a highly desirable need of business travelers. The sleeping berths of First Class were a great success when BA introduced them a few years ago. Business travelers -- who also pay a premium fare -- would gladly pay a little more for some comfortable sleep in-flight. BA exercised ingenuity in developing a seat that converted into a flat bed. The customer is only charged 30% more to compensate for removing another seat to make room for this "bed". The result has been a loyal following of trans-oceanic business travelers who were "delighted" with this service -- and greater market share in this highly profitable market segment. Now, other trans-oceanic airlines are scrambling to provide similar accommodations to the highly profitable business traveler.

Quality Function Deployment (QFD) is an effective tool to evaluate input on customer needs and desires obtained from customer surveys, focus groups, designers, and other sources. The relative importance of both stated and unstated customer needs and desires is assessed as is the degree to which existing products / services and competitors satisfy those needs and desires. Opportunities for gaining competitive advantage are then determined. QFD workshops present an excellent venue for multi-functional personnel to use their diverse viewpoints to quickly obtain solid improvements in the Value of products and services to key customers.

Providing greater value in products and services and in the manner in which those products and services are delivered leads to increased customer satisfaction, customer loyalty, and market share. A solid business plan translates these gains into greater profitability.

List of Previous Value-Adding Ideas

1	Focus on the Vital Few
2	Team Training -- Learn By Doing
3	Use Activity and Value Data to Make "Right-Sizing" Decisions
4	Measure Process Performance to Achieve Continuous Improvement
5	Use Cross-Functional Teams to Achieve High Value Improvements
6	Eliminate High Cost Buyers of Your Products & Services
7	Use Experienced Facilitation to Achieve Results Faster
8	Use Performance Assessment to Identify and Drive Improvements
9	TPM -- Total Productive Maintenance
10	A Team Building Experience
11	Monitoring Processes
12	Alternatives in a Tight Labor Market
13	Integrating Design with Functionality

Previous Value-Adding Ideas are available by e-mail:

Please indicate your company name and your ideas of interest.

Frequently Asked Questions (FAQ) -- Value, Quality, Productivity

1. I have heard that using Quality Function Deployment (QFD) is a very laborious process. Is this so?
   

   Not necessarily. As practiced by Toyota and by Ford on the Taurus, QFD matrices (spreadsheets) can be used to identify and track the Critical-To-Quality characteristics (CTQs) for a product and its processes from the customer (driver) level down to the process controls for individual components. This can be several hundred key CTQs. This can be a very useful tracking mechanism in billion dollar development projects such as new cars, new semi-conductor designs, new cell phones, etc. The top level customer requirements - product features matrix (spreadsheet) has been univerally well-accepted in products and services large and small. We use it in all workshops. Simplified CTQ tracking methods yield most of the benefits of the interactive QFD matrices will little effort. We wholeheartedly endorse simplified QFD.

FAQ -- Six Sigma

1. Do we need to commit to a large Black Belt training program to start a Six Sigma program?
   

   No. Deming has said that different organizations have different needs -- quality programs need to be tailored to fit each organization. Consequently, organizations should gain experience with various 6 Sigma techniques before committing to a broad implementation effort. Then, training can emphasize the techniques with the greatest benefits in your organization's specific situation. Management and employees will gain an understanding of and appreciation for the results that can be obtained. Improving a few products / services can be used as pilot projects.

2. We have a Total Quality program. What do we need to do to apply Six Sigma?
   

   A Six Sigma quality program is an largely an extension of a TQM quality program. You probably have Process Improvement teams with TQM facilitators. You will need to expand their (statistical) data analysis skills. Team leaders need to focus teams on meeting quantified objectives. Management and teams need to emphasize data-based decision-making. This re-training can be largely accomplished through training as teams undertake new projects without the extensive up-front training involved in a new program.

3. Does Six Sigma Black Belt training for the service industry require the same statistical training as is required in the manufacturing industry?

   The basic thesis of Six Sigma is that statistics can help make better decisions -- this is well-accepted. The type of statistics that is most helpful in the service industry and administrative processes varies from the type most helpful in high volume manufacturing and transactions industries. Hypothesis testing and correlation have more application than control charts, for example. Design of Experiments, DOE, may require a different approach when dealing with manual processes. Thus, statistical training for the service industry can and probably should differ from that for the manufacturing industry. All Six Sigma Leaders or black belts should be able to demonstrate good (statistical) data collection and analysis skills.

Please submit your questions on Value, Quality, Productivity, Six Sigma, or Continuous Improvement to:

We will make every effort to respond to all questions through email.