Mercedes has it.
McDonald's has it.
And so does Wal-Mart.
What is it?
Quality...the "Q" Factor.

THE Q FACTOR

What is the "Q"?

ISO, QS, Six Sigma...the manufacturing world has created many different methods to monitor quality. But, the question remains--what is quality? To some it means the finest materials, to others the best service, and for many, especially in manufacturing, it means the fewest defects.

Despite the proliferation of the term, there really is no standard definition of quality.

At Mercedes, quality means the finest materials and engineering.

At McDonald’s, quality equals consistency from store to store.

At Wal-Mart, quality is offering brand name products at low prices.

In all cases quality is derived from two sources: consistency and value. Think about your business. What determines the quality of your goods and services? Quality comes from consistently delivering the value your customers want most.

The Wal-Mart Effect

It used to be that people associated high price with high quality. Not any more. Quality is frequently assumed as customers aggressively shop for the lowest possible rates. Big box stores, like Wal-Mart, have created a model in which the consumer can get high quality and low price. But this model does not translate to all industries.

Wal-Mart’s model works because of massive volumes and incredibly efficient operating systems. They leverage economies of scale that allows them to deliver both quality and price. But despite the Wal-Mart effect, lots of small boutiques continue to thrive. How? By delivering a different definition of quality.

What’s Your "Q"?

Is your company the lowest priced? No? Then how do you justify the products you sell?

Few companies can be Wal-Mart, and price leadership is extremely difficult to maintain. For most of us, the challenge we face is to demonstrate the value we offer. Here are just a few ways in which businesses show the value of quality:

• Specialization
• Exclusivity
• Quality of raw materials
• Quality of manufacturing process
• Convenience
• Pre-sale service
• Post-sale follow-up
• Bundling services and products
• Product durability
• Low defect / failure rates
• Breadth of products / services offered
• Response time / speed of service
• Time savings
• Guarantees

Even more challenging is quantifying those values. Some of the techniques include:

• Calculating product life cost
• Quantifying soft costs such as time savings
• Evaluating productivity gains
• Determining economic value added to the organization

McDonald’s Defines Quality

McDonald’s is a $40 billion company that bills itself as the "Most Successful Small Business in the World." Through more than 29,000 locations they serve 45 billion people each day--while maintaining one of the highest profit margins in the retail food industry.

What’s the secret to McDonald’s success? It’s not the food. It’s not the service. The true genius of McDonald’s is the process. When McDonald’s opens a new store, they don’t just put their name on a building, they provide an entire system for doing business--one that virtually guarantees the new store will perform to the exact same standards as every store that came before it.

Creating the "Q" Factor

Inconsistency and inefficiency are the prime reasons why eight out of ten small businesses fail. To ensure your success, clearly define the processes by which your business should operate. Document every process, define every standard, and systematize every detail. Leave nothing to chance.

Step 1

Define the outcome.

What’s the value you offer to the world? Clearly define your quality in terms of the value you want to deliver to customers. Value can come in many forms: price, service, customer experience, product quality, uniqueness, and convenience, to name a few, and value is not limited to customers. Consider also the value you will provide to owners, employees, and your community. To define your value, consider the following:

• What type of value can you provide?
• How can you quantify the value you offer?
• What would it take to wildly exceed people’s expectations?

Step 2

Understand and measure existing processes.

Do current operations deliver the value you promise? To avoid repeating old mistakes and provide a baseline for future improvements, benchmark the performance of existing processes.

Step 3

Identify processes to be reengineered.

Reengineer processes where results fall short of the expected value. Ideally, you want to correct every process that fails to meet your quality requirements. However, the practical reality is that few companies have the resources to fix everything at once. Start your reengineering effort with those processes that are most critical to delivering value.

Step 4

Create a model that can be operated by people at the lowest possible skill level.

Yes, you read that right. The greatest fallacy in business is that "if we just hired better people the results would be better." The truth is that it’s the process that drives results, not the people.

But, lowest possible skill doesn’t mean lowest quality. The idea is to create a model that allows each function to be performed by someone no more skilled than absolutely necessary. If you run a law firm, you need attorneys, but not to do paralegal or secretarial work. At McDonald’s, it’s the french fry machines that control the quality of the product, not the operator. The model standardizes operating procedures for the process. You must determine:

• The tasks that must be completed and who is best qualified to do them.
• The most efficient sequence for completing the tasks.
• The performance standards that must be met.
• How the process will be managed to ensure consistency.

The modeling process should result in the creation of an operations manual that documents every detail that needs to occur in the delivery of value, how it will be done, expectations for performance, and a process for management.

Step 5

Innovate, Measure, Standardize.

Despite the name, standard operating procedures should be subject to change. Our environment is changing, technology is changing, and there are constant opportunities for improvement that should be pursued--but in a systematic manner. To improve the process, follow these steps:

• Innovate - look for and test incremental improvements to improve value or streamline the process.
• Measure - quantify every innovation and the performance change it produces.
• Standardize - update the operating manual with successful innovations and new performance benchmarks.
• Educate - train all those affected on the new process and standards.

Your Father Was Right!

Yes, Dad knew best--you do get what you pay for! Rarely is the lowest price the best value. Despite the way we perceive them, most goods and services are not commodities. The hidden costs associated with poor quality are often difficult to anticipate--and harder to eliminate.

The "Q" Factor is about value. Want to maximize your "Q"? Then eliminate the inconsistency in your operations. Figure out the value you can deliver, and create the processes to ensure that you consistently deliver it. With consistent operations comes consistent success!