February 29, 2008

Consistent quality practices help managers make customer-focused decisions

Recently one of my students stated that, “quality means different things to different industries.”  The example they shared was that the toys they buy their kids better work (or not be coated with lead paint) because that's what they expected. However; for intangible items - like the accountant they hired for their business taxes, they evaluated quality differently. Reflecting on those differences, my student suggested that creating a "quality process" would require different goals and organizational efforts. For example, at a high level, manufactured goods require more of an engineering perspective of quality. Conversely, business that is more complex or intangible may need a program to define quality in the relationships they have with their customers.  The mention of quality around customer relationships brought the PIMS (profit impact on marketing strategy) study into our classroom discussion.  The PIMS Principle (Buzzell and Gale, 1987) contains interesting research. The study indicated that the profitability of a business is affected by 37 basic factors, explaining the more than 80 percent profitability variation among the businesses studied. Of the 37 basic factors, seven proved to be of primary importance. Based on analysis of information available in the PIMS database, Buzzell and Gale hypothesized that “in the long run, the most important single factor affecting a business unit’s performance is the quality of its products and services relative to those of competitors. A quality edge boosts performance in two ways. In the short run, superior quality yields increased profits via premium prices. In the longer term, superior or improving relative quality is the more effective way for a business to grow, leading to both market expansion and gains in market share.” The concept of quality as it relates to the software industry generally blends three perspectives. First, in many industries software is mission critical; meaning the features must be reliable and always work. For example, a financial services organization is not going to tolerate bugs/defects that result in posting errors. A bank needs to keep their debits and credits in the correct column; its just one of those regulatory things! The second perspective that directly impacts the customer experience is technical support. In the case of an issue or problem users can be very unforgiving if prompt attention and follow-up is lacking. The third area involves innovation. Software users expect applications to continuously evolve to meet their ever changing needs and desires. Each perspective is important, and consistent quality practices will help business managers make customer-focused decisions.