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    Amity Business School

    Business Policy

    &

    Strategic Management

    .. Semester III

    40 Contact

    Hrs.

    4 Credits

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    Transition from Old to New age Policies

    Philosophy of integrating market driven focus elements for continuous

    improvement in all work processes of the enterprise becomes necessary

    due to:

    Customer driven market revolution Fierce global competition

    Unpredictable market, changing expectations & moving targets

    Need to develop a customer focused culture

    Integrate market driven culture

    Focus on quality, cost, productivity

    Customer loyalty & Change Management

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    Evaluation of Competitive Capabilities

    Not only how much better than you own history but how muchbetter than your competitors

    What is that you do that the customers value better than the

    competition

    Evaluation of your resources is of no value unless done in

    respect to your competitors

    If you are not the best in a critical activity, you are sacrificing

    the competitive advantage by continuing to do what you aredoing with old practices

    Only the firms that are able to continually build new strategic

    assets faster and cheaper than the competition will earn superior

    customer value and returns over long period

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    Focus Elements of a Market Driven Enterprise

    Commitment to customer satisfaction

    Human Resource Development

    Total Quality Culture

    Error Prevention Philosophy

    Zero Error Solutions

    Design & Product Quality

    Quality Services

    Quality of Management & Services

    People Development

    Productivity, efficiency and effectiveness

    Process & Technologies for continuous improvement

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    Total Quality Management

    concepts & understanding

    TQM is a philosophy that represents a set of guiding

    principles that lays the foundation of a continuously

    improving and customer driven organization

    The first job we have is to turn out quality merchandise that consumers will buy andThe first job we have is to turn out quality merchandise that consumers will buy andkeep on buying. If we produce it efficiently and economically, we will earn a profit, in whichkeep on buying. If we produce it efficiently and economically, we will earn a profit, in which

    you will share.you will share.

    - William Cooper Procter- William Cooper Procter

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    TQM IS

    Encompassing and mobilizing entire organization to satisfy the customer

    Improving each individual and groups within the organization

    Integrating the philosophy and practices in day to day approach to work

    Influencing all product, services, systems, process & technology Long term and continuous and is sensitive to the social responsibilities of

    the enterprise

    Supporting High Performance Culture through teamwork, trust &

    leadership

    IT IS NOT A program, that has a beginning & an end.

    It is a continuous journey.

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    History

    Craftsmen Early days, generations learning, own inspector.

    Early 20th Century Unskilled repetitive, start of interchangeability.

    Ford Story.Standardization, concepts for quality, Mass Mfg.

    Post War..American Society for Quality 1944

    Safety, Public interest producer beware

    Dr. Joseph Juran & Dr. Edward Demming story

    Pioneering work in Total Quality ( in Japan )

    Demming returns to US (1980-1993)

    Product Quality to Performance Excellence

    Quality of Management as important as Management of Quality

    American Society for Quality identifies future challenges Partnering, Learning system, Adaptability and speed of change

    Environmental Sustainability, Knowledge Focus, Globalization

    Customization & Differentiation, Shifting Demographics

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    Some leaders of Quality

    Malcom Baldrige

    Joseph M Juran

    Deming

    http://www.google.co.in/imgres?imgurl=http://www.hkbu.edu.hk/~samho/tqm/deming.gif&imgrefurl=http://www.hkbu.edu.hk/~samho/tqm/index.htm&usg=__nCx1BASDOvqKHNZ9_xLG6T9QDzU=&h=367&w=311&sz=34&hl=en&start=12&um=1&itbs=1&tbnid=D4fs65_OGvVnVM:&tbnh=122&tbnw=103&prev=/images%3Fq%3Ddeming%2Baward%26um%3D1%26hl%3Den%26sa%3DN%26tbs%3Disch:1
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    Jurans Quality management Ideas

    . The following table outlines the major points of Dr. Juran's quality management ideas:

    Quality Trilogy: Quality Planning

    Identify who are the customers. Determine the needs of those customers. Translate those needs into our language. Develop a product that can respond to those needs. Optimise the product features so as to meet our needs and customer needs. Quality Improvement Develop a process which is able to produce the product. Optimise the process.

    Quality Control Prove that the process can produce the product under operating conditions with minimal

    inspection. Transfer the process to Operations.

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    The Baldrige Award is given by the USPresident to businesses (manufacturing as

    well as service) and

    to education and healthcare organisations

    that apply and are

    judged to be outstanding in seven areas:

    (1) leadership,(2) strategic planning, (3) customer and

    market focus,

    (4) measurement, analysis and knowledge

    management,

    (5) human resource focus, (6) process

    management and

    (7) results

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    Edward Deming

    International Activities Statistician, Allied Mission to Observe the Greek Elections, January-April 1946; July-

    October 1946 Consultant in sampling to the Government of India, January andFebruary 1947; December 1951; March 1971Delegate from the A.A.A.S. to the Indian Science Congress, New Delhi, January 1947Adviser in sampling techniques to the Supreme Command of the Allied Powers,Tokyo, 1947 and 1950

    Teacher and consultant to Japanese industry, through the Union of JapaneseScientists and Engineers 1950, 1951, 1952, 1955, 1960, 1965Member of the United Nations Sub-Commission on Statistical Sampling, 1947-52Consultant to the Census of Mexico, to the Bank of Mexico, and to the Ministry ofEconomy, 1954, 1955Consultant., Statistisches Bundesamt, Wiesbaden, 1953Consultant to the Central Statistical Office of Turkey, 1959-1962Lecturer, London School of Economics, March 1964Lecturer, Institut de Statistique de l'Universite de Paris, March 1964Consultant to the China Productivity Center, Taiwan, 1970, 1971Lecturer in Santiago, Crdoba (Argentina), and Buenos Aires, under the auspices ofthe Inter American Statistical Institute, 1971.

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    TQM

    All Employees involved

    Empowerment

    TeamworkQuality Strategy

    Quality Assurance

    Quality Systems ISOQuality Planning

    Quality PolicyQuality ControlsProblem Solving

    Journey to TQM.

    Quality Control

    Quality StandardsStatistical ControlsProcess PerformanceTreat Quality Problems

    Inspection

    Error DetectionRectificationUnhappy Customer

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    1313

    History of QualityHistory of Quality ( Contd.)( Contd.)History of QualityHistory of Quality ( Contd.)( Contd.)

    Quality awareness in U.S. manufacturing industry duringQuality awareness in U.S. manufacturing industry during

    1980s: from Little Q to Big Q - Total Quality1980s: from Little Q to Big Q - Total Quality

    ManagementManagement

    Malcolm Baldrige National Quality Award (1987)Malcolm Baldrige National Quality Award (1987)

    Disappointments and criticismDisappointments and criticism

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    1414

    Emergence of quality management in service industries,Emergence of quality management in service industries,

    government, health care, and educationgovernment, health care, and education

    Evolution of Six SigmaEvolution of Six Sigma

    Current and future challenge: keep progress in qualityCurrent and future challenge: keep progress in quality

    management alivemanagement alive

    History of QualityHistory of Quality ( Contd.)( Contd.)History of QualityHistory of Quality ( Contd.)( Contd.)

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    Contemporary Influences on QualityContemporary Influences on Quality

    Partnering

    Learning systems

    Adaptability and speed of change

    Environmental sustainability Globalization

    Knowledge focus

    Customization and differentiation

    Shifting demographics

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    Definitions of QualityDefinitions of QualityDefinitions of QualityDefinitions of Quality

    Transcendent definitionTranscendent definition: excellence: excellence

    Product-based definitionProduct-based definition: quantities of product attributes: quantities of product attributes

    User-based definitionUser-based definition: fitness for intended use: fitness for intended use

    Value-based definitionValue-based definition: quality vs. price: quality vs. price

    Manufacturing-based definitionManufacturing-based definition: conformance to specs: conformance to specs

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    Quality PerspectivesQuality Perspectives

    CustomerCustomer

    DistributionDistribution

    productsproducts

    andand

    servicesservices

    needsneeds

    transcendent &transcendent &

    product-basedproduct-based user-baseduser-based

    manufacturing-manufacturing-

    basedbased

    value-basedvalue-based

    MarketingMarketing

    DesignDesign

    ManufacturingManufacturing

    InformationInformationflowflow

    ProductProductflowflow

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    Paradigm Shift

    From.

    Management of Quality

    to

    Quality of Management

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    Criteria

    Leadership

    Strategic Planning

    Customer & Market Focus

    Information & Analysis

    Human Resources Development

    & Planning

    Process Management

    Business Results

    Weightage

    12%

    8%

    8%

    8%

    10%10%

    44%

    Malcolm Baldrige

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    Understanding of Criteria

    1. Leadership Leadership System.. How the senior leaders guide the company in setting directions

    and in developing and sustaining an effective leadership system.

    Company Responsibility & Citizenship How the company addresses the its

    responsibility to the public and how it practices good citizenship.

    1. Strategic Planning

    Strategy Development Process.. How the company sets strategic directions to betterdefine and strengthen its competitive position and how the development process leads

    to action plan for deploying and aligning key plan and performance requirements.

    Company Strategy.. How the performance requirements and measures align with the

    human resource plan and how the plans project the cos future as compared to the

    competitors and key benchmarks.

    1. Customer & Market Focus Customer & Market Knowledge.. How the company determines the long term

    requirements and preference of target and potential customers and market and

    anticipate needs to develop business opportunities .

    Customer Relationship & Satisfaction Enhancement..How the company determines

    and enhances the satisfaction of customers to strengthen relationships to improve

    current offerings and to support customer and market related planning.

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    4. Information & Analysis

    Selection & Use of Information & DataHow the co. selects, manages and uses theinformation and data needed to support key company process and improve the cosperformance.

    Selection & use of comparative information & data.. How the company selects,manages and uses comparative information data to improve cos competitive position.

    Analysis & Review of Companys Performance..How the co. analyses and reviewsoverall performance to assess the progress relative to plans to identify key areas of

    improvement.

    5. Human Resources Development & Management

    Work Systems.. What is the companys work & job design and its compensation andrecognition approaches to enable and encourage all employees to contribute effectivelyto achieve the cos performance and learning objective.

    Employee Education Training & Development.. How the cos training and educationaddresses its plan and needs including building knowledge & capabilities & contribute toimproved employees performance and development.

    Employee Well-Being & Satisfaction..How the company maintains its workenvironment and work climate to support the well-being, satisfaction and motivation ofall its employees

    Understanding of Criteria (contd.)

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    6. Process Management

    Management of Product & Service Processes..How the significantly modified and

    customized products and services are designed. How the product/services delivery

    systems are designed, implemented and improved.

    Management of Support Process.. How the cos key support processes are designed,

    managed and continuously improved.

    Management of Supplier and Partnering..How the cos supplier and partnering

    processes, performance and relationships are managed and improved.

    7. Business Results

    Customer Satisfaction Results..How the co. performance on Customer Satisfaction

    Financial & Market Results.Cos key financial & marketplace performance

    Human Resource ResultsCos Human Resource results including employee well-being, satisfaction, development and work system performance

    Supplier & Partner ResultsCos supplier and partner results

    Company-Specific ResultsHow the companys key operational performance and

    results significantly contribute to key company goals- customer satisfaction, operational

    effectiveness and financial/market place and performance.

    Understanding of Criteria ( Contd.)

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    LeadershipLeadership

    The ability to positively influence people andThe ability to positively influence people and

    systems under ones authority to have a meaningfulsystems under ones authority to have a meaningful

    impact and achieve important resultsimpact and achieve important results

    A it B i S h l

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    The Baldrige Leadership TriadThe Baldrige Leadership Triad

    Leadership

    Strategic

    Planning

    Customer andMarket Focus

    Operations

    A it B i S h l

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    Executive LeadershipExecutive Leadership

    Defining and communicating business directionsDefining and communicating business directions

    Ensuring that goals and expectations are metEnsuring that goals and expectations are met

    Reviewing business performance and taking appropriateReviewing business performance and taking appropriate

    actionaction Creating an enjoyable work environmentCreating an enjoyable work environment

    Soliciting input and feedback from customersSoliciting input and feedback from customers

    Ensuring that employees are effective contributorsEnsuring that employees are effective contributors

    Motivating, inspiring, and energizing employeesMotivating, inspiring, and energizing employees Recognizing employee contributionsRecognizing employee contributions

    Providing honest feedbackProviding honest feedback

    A it B i S h l

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    Key IdeaKey Idea

    Effective leadership requires five core

    leadership skills:

    vision

    Empowerment

    Intuition

    self-understanding

    and value congruence.

    A it B i S h l

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    LeadingLeading Practices LeadershipLeadingLeading Practices Leadership

    Create a customer-focused strategic vision and clear qualityvalues

    Create and sustain leadership system and environment forempowerment, innovation, and organizational learning

    Set high expectations and demonstrate personal commitmentand involvement in quality

    Integrate quality values into daily leadership andmanagement and communicate extensively

    Review organizational performanceReview organizational performance Create an environment and governance system that fostersCreate an environment and governance system that fosterslegal and ethical behaviorlegal and ethical behavior

    Integrate public responsibilities and community support intoIntegrate public responsibilities and community support intobusiness practicesbusiness practices

    A it B i S h l

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    Leadership SystemLeadership SystemLeadership SystemLeadership System

    Leadership SystemLeadership System

    .. how decisions are made, communicated, and.. how decisions are made, communicated, and

    carried out at all levels; mechanisms for leadershipcarried out at all levels; mechanisms for leadership

    development, self-examination, and improvementdevelopment, self-examination, and improvement

    Effectiveness of Leadership SystemEffectiveness of Leadership System

    depends in part on its organizational structuredepends in part on its organizational structure

    Amity Business School

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    Key IdeaKey Idea

    AnEffective Leadership System respects the

    capabilities and requirements of employees

    and other stakeholders, and sets highexpectations for performance and

    performance improvements.

    Amity Business School

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    GovernanceGovernance

    Governance

    . The system of management and controls

    exercised in the stewardship of an organization.Approving strategic directionMonitoring and evaluating CEO performance

    Succession planning

    Financial auditingExecutive compensation

    Disclosure

    Shareholder reporting

    Amity Business School

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    Leadership and SocialLeadership and Social

    ResponsibilitiesResponsibilities

    EthicsEthics

    Health, safety, and environmentHealth, safety, and environment Community supportCommunity support

    Amity Business School

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    Key IdeaKey Idea

    Practicing good citizenship refers to

    leadership and supportwithin the limits of

    an organizations resourcesof publiclyimportant purposes, including improving

    education, community health, environmental

    excellence, resource conservation,community service, and professional

    practices.

    Amity Business School

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    Leadership ..TQM relevance

    Definition Traditional

    Leadership for Quality Assortment of behaviors

    vision, hope, stimulation, mission, transformation dreams toreality, stewardship, Integration, courage, communication,consensual, conviction, empowering

    deploying, motivating, motivating and tenacity.

    Executive Leadership-not the only one

    Changed Business Scenario & New Economy demanding Unit,Team, Project and Transformational Leadership

    No more the one or few men show

    Strategic Plan Integration

    Quality is the key element to strategic planning for Qualitymanagement and Performance Excellence under the currentbusiness environment

    Identification of such competitive advantages that is driven bycustomer and market.

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    Leadership ..TQM relevance

    Effective Leadership

    Five Core Skills vision, empowerment, intuition, self-understanding & valuecongruence

    Leadership Practices

    Customer Focus, Strategic vision, Quality value

    Creating sustainable leadership, environment, empowerment, innovate

    Setting high expectations, demonstrate substantial personal commitment andinvolvement, missionary zeal and constancy of purpose

    Integrating quality values in daily values, extensive communication

    Integrate public responsibility and community support in business practices

    TQ Leadership Contrasts.. Details

    Leadership & Public Responsibilities

    Public Health, safety & environment

    Compliance

    Corporate Citizenship, Community education, welfare, conservation

    Industry Obligation to Community

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    TQ Leadership Contrasts

    Traditional

    Plan Projects

    Make plans

    Organize resource

    Preach M.B.O Push Products

    Lip service to quality

    Sell to customer

    Perform R&D

    Control People

    Control through systems

    Reward conformance punishdeviation

    Maintain status QUO

    TQ Leaders

    Practice

    Envision the future

    Optimize the resource

    Participative management Produce

    Exemplary quality Service the customer

    Innovate

    Motivate people Development, talent & system

    Reward effort, skilldevelopment and empower

    Continuous improvement

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    Strategic PlanningThe process of envisioning organizations future and

    developing necessary procedures and operations to shape andachieve that future

    Concept Plan that integrates an organizations major goals

    Policies and actions sequences in alignment and supporting the goals

    Marshalling and allocating organizations resources into an uniqueand viable posture

    Based on ones relative strengths and competencies and anticipatedchanges in the environment

    Counter measures and actions anticipating contingent moves byintelligent opponents

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    Leading Practices

    Top management, employees & even customers actively participate inthe planning process

    Systematic planning process for strategy development and deploymentincluding measurement, feedback and review.

    Gathering and analysis of variety of data external & internal factors

    Alignment of short-term action plans with long term strategic objectives. Derive human resource plans from strategic objectives and action plansDerive human resource plans from strategic objectives and action plans

    Strategic Planning Influence of TQ culture

    Vision

    Mission

    Guiding Principle

    Strategies ObjectivesAction

    Plans

    Environmental

    Scan

    Strategy Development

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    MissionMission

    Definition of products and services, markets,Definition of products and services, markets,

    customer needs, and distinctive competenciescustomer needs, and distinctive competencies

    SolectronSolectron: : to provide worldwide responsiveness to ourto provide worldwide responsiveness to our

    customers by offering the highest quality, lowest totalcustomers by offering the highest quality, lowest total

    cost, customized, integrated, design, supply chain, andcost, customized, integrated, design, supply chain, andmanufacturing solutions through long-term partnershipsmanufacturing solutions through long-term partnerships

    based on integrity and ethical business practices.based on integrity and ethical business practices.

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    VisionVision

    .Where the organization is headed and.Where the organization is headed and

    what it intends to be.what it intends to be. Brief and memorable - grab attentionBrief and memorable - grab attention

    Inspiring and challenging - creates excitementInspiring and challenging - creates excitement

    Descriptive of an ideal state - provides guidanceDescriptive of an ideal state - provides guidance

    Appealing to all stakeholders - employees can identify withAppealing to all stakeholders - employees can identify with

    Solectron:Solectron:Be the best and continuously improveBe the best and continuously improve

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    Values (Guiding Principles)Values (Guiding Principles)

    Defines attitudes and policies for all employees, whichDefines attitudes and policies for all employees, which

    are reinforced through conscious and subconsciousare reinforced through conscious and subconscious

    behavior at all levels of the organization.behavior at all levels of the organization.

    Pepsico:Pepsico: Integrity, Honesty, Teamwork, Balance,Integrity, Honesty, Teamwork, Balance,

    AccountabilityAccountability

    Whirlpool:Whirlpool: Respect, Integrity, Teamwork, TrustRespect, Integrity, Teamwork, Trust

    Leadership, Customer PassionLeadership, Customer Passion

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    y

    Environmental AssessmentEnvironmental Assessment

    TEMPLES or PESTLE

    Customer and market requirements, expectations and opportunitiesCustomer and market requirements, expectations and opportunities Technological and other innovationsTechnological and other innovations

    Organizational strengths and weaknessesOrganizational strengths and weaknesses

    Financial, societal, ethical, regulatory and other potential risksFinancial, societal, ethical, regulatory and other potential risks

    Changes in global or national economyChanges in global or national economy

    Factors unique to the organization, such as partner and supplyFactors unique to the organization, such as partner and supply

    chain needschain needs

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    y

    Key Idea

    Strategies are broad statements that set the direction

    for the organization to take in realizing its mission

    and vision.

    Strategic objectives are what an organization must

    change or improve to remain or become competitive.

    Action plans are things that an organization must doto achieve its strategic objectives.

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    y

    Converting the strategies into small doable goals and then ultimately

    deployed to the right teams & people in form of SMART objectives

    Balance Scorecard Hoshin Kanri or Hoshin Planning or Policy Deployment

    Management by Planning

    Team based deployment is most suited to TQ environment

    Strategic Deployment TQ way

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    y

    Balance Scorecard

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    y

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    4646

    Policy Deployment

    (Hoshin Kanri)

    Policy Deployment

    (Hoshin Kanri)

    Top management vision leading to long-termTop management vision leading to long-term

    objectivesobjectives

    Deployment through annual objectives and actionDeployment through annual objectives and actionplansplans

    Negotiation for short-term objectives and resourcesNegotiation for short-term objectives and resources

    (catchball)(catchball) Periodic reviewsPeriodic reviews

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    Leadership and OrganizationalLeadership and Organizational

    StructureStructure

    Basic types of organizational structuresBasic types of organizational structures

    Line organizationLine organization

    Line and staff organizationLine and staff organization

    Matrix organizationMatrix organization

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    Key Idea

    As more and more companies accept the process view of

    organizations, they are structuring the quality organization

    around functional or cross-functional teams.

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    Strategic Planning Customer & market driven quality integrated into bloodstream

    Integrated into the product, operations and service processes

    Operational Excellence to deliver on above

    Deployment Deployment to the right people with smart objectives

    Organizations ability to translate strategic objective into action plans

    Caliberations What the auditor will look for

    Customer DrivenQuality

    Operational

    Excellence

    TQM way to implement strategy

    TQ aspects include

    EmpowermentDiffused Leadership

    Institutionalized

    LearningInnovation and

    Experimentation

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    5050

    Focusing on CustomersFocusing on Customers

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    Key IdeaKey Idea

    To create satisfied customers, the organization

    needs to identify customers needs, design the

    production and service systems to meet thoseneeds, and measure the results as the basis for

    improvement.

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    5252

    Importance of CustomerImportance of Customer

    Satisfaction and LoyaltySatisfaction and Loyalty

    Satisfaction is an attitude; loyalty is a behavior

    Loyal customers spend more, are willing to pay higherprices, refer new clients, and are less costly to do businesswith.

    It costs five times more to find a new customer than to keep

    an existing one happy.

    A firm cannot create loyal customers without first creatingsatisfied customers.

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    Key IdeaKey Idea

    Customer wants and needs drive competitive

    advantage, and statistics show that growth in

    market share is strongly correlated with

    customer satisfaction.

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    Customer Satisfaction ModelCustomer Satisfaction Model

    Perceived

    quality

    Customer

    complaints

    Perceived

    valueCustomer

    satisfaction

    Customer

    expectations Customer

    loyalty

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    5555

    Customer-Driven Quality CycleCustomer-Driven Quality Cycle

    measurement and feedback

    Customer needs and expectations

    (expected quality)

    Identification of customer needs

    Translation into product/service specifications

    (design quality)

    Output (actual quality)

    Customer perceptions (perceived quality)

    PERCEIVED QUALITY is a comparison of

    ACTUAL QUALITY to EXPECTED QUALITY

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    Key IdeaKey Idea

    Many organizations still focus more on

    processes and products from an internal

    perspective, rather than taking theperspective of the external customer.

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    Leading PracticesLeading Practices

    Define and segment key customer groups andDefine and segment key customer groups andmarketsmarkets

    Understand the voice of the customer (VOC)Understand the voice of the customer (VOC)

    Understand linkages between VOC and design,Understand linkages between VOC and design,production, and deliveryproduction, and delivery

    Build relationships through commitments, provideBuild relationships through commitments, provideaccessibility to people and information, set serviceaccessibility to people and information, set service

    standards, and follow-up on transactionsstandards, and follow-up on transactions Effective complaint management processesEffective complaint management processes

    Measure customer satisfaction for improvementMeasure customer satisfaction for improvement

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    Key Customer Groups

    Organization levelOrganization level consumersconsumers

    external customersexternal customers

    employeesemployees societysociety

    Process levelProcess level internal customer units or groupsinternal customer units or groups

    Performer levelPerformer level individual internal customersindividual internal customers

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    Identifying Internal CustomersIdentifying Internal Customers

    What products or services are produced?What products or services are produced?

    Who uses these products and services?Who uses these products and services?

    Who do employees call, write to, or answerWho do employees call, write to, or answer

    questions for?questions for?

    Who supplies inputs to the process?Who supplies inputs to the process?

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    AT&T Customer-Supplier ModelAT&T Customer-Supplier Model

    Requirements

    and feedback

    Requirements

    and feedback

    Your

    Suppliers

    Your

    Processes

    Your

    CustomersInputs Outputs

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    Key IdeaKey Idea

    The natural customer-supplier linkages among

    individuals, departments, and functions build

    up the chain of customers throughout anorganization that connect every individual and

    function to the external customers and

    consumers, thus characterizing the

    organizations value chain.

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    Customer SegmentationCustomer Segmentation

    DemographicsDemographics

    GeographyGeography

    VolumesVolumes

    Profit potentialProfit potential

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    Key IdeaKey Idea

    Segmentation allows a company to prioritize

    customer groups, for instance by considering

    for each group the benefits of satisfying their

    requirements and the consequences of failing to

    satisfy their requirements.

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    Key Dimensions of QualityKey Dimensions of Quality

    Performance primary operating characteristics

    Features bells and whistles

    Reliability probability of operating for specific timeand conditions of use

    Conformance degree to which characteristicsmatch standards

    Durability - amount of use before deterioration orreplacement

    Serviceability speed, courtesy, and competence ofrepair

    Aesthetics look, feel, sound, taste, smell

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    Key Dimensions of Service QualityKey Dimensions of Service Quality

    ReliabilityReliability ability to provide what was ability to provide what waspromisedpromised

    AssuranceAssurance knowledge and courtesy of knowledge and courtesy ofemployees and ability to convey trustemployees and ability to convey trust

    TangiblesTangibles physical facilities and appearance physical facilities and appearanceof personnelof personnel

    EmpathyEmpathy degree of caring and individual degree of caring and individualattentionattention

    ResponsivenessResponsiveness willingness to help customers willingness to help customersand provide prompt serviceand provide prompt service

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    6666

    Kano Model of Customer NeedsKano Model of Customer Needs

    Dissatisfiers:Dissatisfiers: expected requirementsexpected requirements

    Satisfiers:Satisfiers:

    expressed requirementsexpressed requirements

    Exciters/delighters:Exciters/delighters: unexpected featuresunexpected features

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    Key IdeaKey Idea

    As customers become familiar with them,

    exciters/delighters become satisfiers over

    time. Eventually, satisfiers becomedissatisfiers.

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    Customer Listening PostsCustomer Listening Posts

    Comment cards and formal surveysComment cards and formal surveys

    Focus groupsFocus groups

    Direct customer contactDirect customer contact

    Field intelligenceField intelligence

    Complaint analysisComplaint analysis

    Internet monitoringInternet monitoring

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    Key IdeaKey Idea

    Companies use a variety of methods, or

    listening posts, to collect information about

    customer needs and expectations, theirimportance, and customer satisfaction with the

    companys performance on these measures.

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    l f Cl if i C

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    Tools for Classifying CustomerTools for Classifying Customer

    RequirementsRequirements

    Affinity diagram Tree diagram

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    Moments of TruthMoments of Truth

    Every instance in which a customer comes inEvery instance in which a customer comes incontact with an employee of the company.contact with an employee of the company.

    Example (airline)Example (airline)Making a reservationMaking a reservation

    Purchasing ticketsPurchasing tickets

    Checking baggageChecking baggage

    Boarding a flightBoarding a flight Ordering a beverageOrdering a beverage

    Requests a magazineRequests a magazine

    DeplanesDeplanes

    Picks up baggagePicks up baggage

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    Key IdeaKey Idea

    An organization builds customer loyalty by

    developing trust, communicating with

    customers, and effectively managing the

    interactions and relationships with customers

    through approaches and its people. Companies

    must carefully select customer contact

    employees, train them well, and empower them

    to meet and exceed customer expectations.

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    Customer Relationship ManagementCustomer Relationship Management

    Accessibility and commitmentsAccessibility and commitments

    Selecting and developing customer contactSelecting and developing customer contact

    employeesemployees Relevant customer contact requirementsRelevant customer contact requirements

    Effective complaint managementEffective complaint management

    Strategic partnerships and alliancesStrategic partnerships and alliances

    Exploiting CRM technologyExploiting CRM technology

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    Key IdeaKey Idea

    To improve products and processes

    effectively, companies must do more than

    simply fix the immediate problem. They needa systematic process for collecting and

    analyzing complaint data and then using

    that information for improvements.

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    Measuring Customer SatisfactionMeasuring Customer Satisfaction

    Discover customer perceptions of businessDiscover customer perceptions of business

    effectivenesseffectiveness

    Compare companys performance relative toCompare companys performance relative to

    competitorscompetitors

    Identify areas for improvementIdentify areas for improvement

    Track trends to determine if changes result inTrack trends to determine if changes result in

    improvementsimprovements

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    Key IdeaKey Idea

    An effective customer satisfaction

    measurement system results in reliable

    information about customer ratings ofspecific product and service features and

    about the relationship between these ratings

    and the customers likely future market

    behavior.

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    Survey DesignSurvey Design

    Identify purposeIdentify purpose

    Determine who should conduct the surveyDetermine who should conduct the survey

    Select the appropriate survey instrumentSelect the appropriate survey instrument

    Design questions and response scalesDesign questions and response scales

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    Key IdeaKey Idea

    The types of questions to ask in a survey

    must be properly worded to achieve

    actionable results. By actionable, we meanthat responses are tied directly to key

    business processes, so that what needs to be

    improved is clear; and information can be

    translated into cost/revenue implications to

    support the setting of improvement

    priorities.

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    Performance-Importance AnalysisPerformance-Importance Analysis

    Performance

    Impor

    tance

    Low High

    Low

    High

    Who cares? Overkill

    Vulnerable Strengths

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    Key IdeaKey Idea

    Appropriate customer satisfaction measurement

    identifies processes that have high impact on

    satisfaction and distinguishes between lowperforming processes low performance and

    those that are performing well.

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    Difficulties withDifficulties with

    Customer Satisfaction MeasurementCustomer Satisfaction Measurement

    Poor measurement schemesPoor measurement schemes

    Failure to identify appropriate quality dimensionsFailure to identify appropriate quality dimensions

    Failure to weight dimensions appropriatelyFailure to weight dimensions appropriately

    Lack of comparison with leading competitorsLack of comparison with leading competitors

    Failure to measure potential and former customersFailure to measure potential and former customers

    Confusing loyalty with satisfactionConfusing loyalty with satisfaction

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    Customer Perceived ValueCustomer Perceived Value

    CPV measures how customers assess benefitsCPV measures how customers assess benefits

    such as product performance, ease of use, orsuch as product performance, ease of use, or

    time savingsagainst costs, such as purchasetime savingsagainst costs, such as purchase

    price,installation cost or time, and so on,inprice,installation cost or time, and so on,in

    making purchase decisions.making purchase decisions.

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    Loyalty grid

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    Loyalty grid

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    CUSTOMER LOYALTY RELATIONSHIPS

    Non-competitive zone

    Regulated, Monopoly or few

    substitutes. Dominant Brand

    Equity. High cost of

    switching. Powerful Loyalty

    Prog.

    Proprietary Technology.

    Highly competitive zone.

    Commoditization or low

    differentiation. Consumer

    Indifference. Many

    substitutes. Low cost of

    Switching

    Relationship of Customer Satisfaction and Profitability

    Total Satisfaction for captive customers

    Tyranny of Averages

    Satisfying Target Segments

    Ultimate Source of Focus: affinity Groups

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    Customer Loyalty Grid

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    Customer Loyalty Grid

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    THE IMPORTANCE OF FOCUS

    Organization that have not identified the customers they are targeting have a

    special handicap in achieving total customer satisfaction and create many merely

    satisfieds.

    Customer tell about only extra-ordinary experience