Introduction: Quality and Performance Excellence

Joseph A. De Feo

High Points of This Chapter

Why Quality Management? A Brief History Lesson

Market Quality Leadership and Business Strategy

Macroeconomic Influences on Results

Contrast in Views: Customers' and Producers'

Needs Related to Dissatisfaction

Discovering Hidden Customer Needs

Perfectionism

Acknowledgments

References

D.1. High Points of This Chapter

1. Organizations that attain superior results, by designing and continuously improving the quality of their goods and services,
are often called world class, best practices, and most recently performance excellence.

2. The quality of goods and services that meet customer needs must be a top leadership priority. Customer satisfaction must
be the chief operating goal embedded in the company vision and strategic plans.

3. Leaders must make quality a strategic priority. The business plan was opened up to include quality goals and balanced
scorecards, year after year.

4. Leaders must create a culture of performance excellence. All organizations that have attained superior quality and results
did so with a systematic approach not a haphazard one.

5. Developing a quality management system to enable continuous innovation, compliance and control and continual process
improvement is good business practice. The business plan must include goals for improvement.

6. Educate the workforce in the methods to manage for quality and excellence. Training was extended beyond the quality
department to all functions and levels, including upper managers.

7. Engage employees. This includes training and empowering the workforce to participate in planning and improvement of the
"useful many" opportunities. Motivation was supplied through extending the use of recognition and rewards for responding
to the changes demanded by the quality revolution. Measurements were developed to enable upper managers to follow
progress toward providing customer satisfaction, meeting competition, improving quality, and so on. Upper managers took
charge of managing for quality by recognizing that certain responsibilities were not delegable—they were to be carried out
by the upper managers, personally.

8. Conduct organization-wide assurance audits. This focus is on improving and ensuring that all goods, services, processes,
and functions in an organization are of high quality.

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9. Continually benchmark best practices to set new targets. This approach was adopted to set goals based on superior results
already achieved by others.

D.2. Why Quality Management? A Brief History Lesson

Quality is a word with multiple meanings. It is often used to describe the term a customer uses when they like something they
tried or purchased. It is a word that is used synonymously with an organization's mission—to provide superior quality to
customers and stakeholders. It is also a word used to describe many methods to improve business performance, such as this
text's title, Juran's Quality Handbook. A brief look at history will help better understand where quality management is today and
where it may be headed tomorrow.

Practitioners are urged to learn about the different approaches to quality, choose the best methods to fit your business needs,
and then customize the framework for your own organizations. In this book we will present the body of knowledge that works.

We will refer to examples of the most popular frameworks such as the U.S. Malcolm Baldrige National Award for Excellence
(and all similar frameworks around the globe) and the ISO Quality Management System to name a few.

Two dramatic examples illustrate how quality has an impact on both sales revenue and costs. First, two examples of poor
quality. An international organization that claimed to have strong customer service refused to accept sales orders for delivery in
less than 48 hours—even though competitors honored delivery requests of 24 hours. Imagine the millions of dollars of sales
revenue lost each year because this company did not recognize the need of its customers. Second, listen to the president of a
specialty manufacturing company: "Our scrap and rework costs this year were five times our profit. Because of those costs, we
have had to increase our selling price and we subsequently lost market share. Quality is no longer a technical issue; it is a
business issue." Samsung Electronics used quality as a mantra, as a method to attain $1.6 billion in savings by focusing on
improving the quality of flat-screen TV sets, making them the best practice globally. Everyone knows about Toyota quality. Why?
Because its products have a reputation of being the best.

There are many stories like this. The conclusion is the same. If an organization focuses on the relentless pursuit of quality, it will
attain a sustainable business performance and positive global reputation. Our forefathers knew—as we know—that quality is
important. Metrology, specifications, inspection—all go back many centuries.

Then came the twentieth century. The pace quickened with a lengthy procession of "new" activities and ideas launched under a
bewildering array of names: quality control, continuous quality improvement, defect prevention, statistical process control,
reliability engineering, quality cost analysis, zero defects, total quality management, supplier certification, quality circles, quality
audit, quality assurance, quality function deployment, Taguchi methods, competitive benchmarking, Lean and Six Sigma. This
book discusses all these concepts and places them into a context that is needed to sustain business performance.

Following World War II, two major forces emerged that have had a profound impact on quality.

The first force was the Japanese revolution in quality. Prior to World War II, many Japanese products were perceived,
throughout the world, as of poor quality. To help sell their products in international markets, the Japanese took some
revolutionary steps to improve quality:

1. Upper level managers personally took charge of leading the revolution.

2. All levels and functions received training in the quality disciplines.

3. Quality improvement projects were undertaken on a continuing basis—at a revolutionary pace.

The Japanese success has been almost legendary.

The second major force to affect quality was the prominence of product quality in the public mind. Several trends converged to
highlight this prominence: product liability cases; concern about the environment; some major disasters and near disasters;

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pressure by consumer organizations; and the awareness of the role of quality in trade, weapons, and other areas of international
competition. This emphasis on quality has been further accented by the emergence of national awards such as the Baldrige
and European Quality Awards.

Quality is not limited to the manufacturing sector. Quality concepts are applied to other sectors such as health care, education,
not-for-profit organizations, and governments. Product quality is not the only focus. Service quality, process quality, and data
quality are now being measured, controlled, and improved.

During the twentieth century, a significant body of knowledge emerged on achieving superior quality. Many individuals
contributed to this knowledge, and five names deserve particular mention: Juran, Deming, Feigenbaum, Crosby, and Ishikawa.

J. M. Juran emphasizes the importance of a balanced approach using managerial, statistical, and technological concepts of
quality. He recommends an operational framework of three quality processes, quality planning, quality control, and quality
improvement. The foundation for this book is the Juran approach. This book makes frequent references to Juran's Quality
Handbook, sixth edition, which is denoted JQH6, as well as the fifth edition, JQH5.

W. Edwards Deming also had a broad view of quality, which he initially summarized in 14 points aimed at the management of
an organization. These 14 points rest on a system of "profound knowledge" that has four parts: the systems approach,
understanding of statistical variation, the nature and scope of knowledge, and psychology to understand human behavior.

A. V. Feigenbaum emphasizes the concept of total quality control throughout all functions of an organization. Total quality
control really means both planning and control. He urges creating a quality system to provide technical and managerial
procedures that ensure customer satisfaction and an economical cost of quality.

Philip Crosby defines quality strictly as "conformance to requirements" and stresses that the only performance standard is zero
defects. His activities demonstrated that all levels of employees can be motivated to pursue improvement but that motivation
will not succeed unless tools are provided to show people how to improve.

Kaoru Ishikawa showed the Japanese how to integrate the many tools of quality improvement, particularly the simpler tools of
analysis and problem solving.

The approaches of these gurus have similarities as well as differences—particularly in the relative emphasis on managerial,
statistical, technological, and behavioral elements. This book draws upon the contributions of these and other experts.

Juran (1995) provides a comprehensive history of managing for quality for different time spans (ancient, medieval, modern),
geographical areas, products, and political systems.

The major forces affecting managing for quality led to a changing set of business conditions.

Watson (2016) states that the true meaning of quality is much deeper and broader than these specific definitions imply. What is
most salient about quality is the purpose for which it is pursued. What does this mean? What is the "objective function" of
quality efforts? Quality is the persistent pursuit of goodness coupled tightly with a simultaneous relentless avoidance of
badness.

All of the above definitions are useful to understanding how to manage quality. However, the most important definition of
quality is what your customers mean by it. This is the essence of this handbook. Quality is defined by your customers. This
handbook points out what has worked for others that may work for you.

D.2.1. Quality and Business Performance

The impact that the quality of products, services, and processes has on business performance and performance excellence has
been a dominant force in the last decade. "A business that has goods and services that are superior to its competitors' in
features and value will outperform those that do not."

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Every organization can achieve performance excellence and sustainable business results through by understanding Juran's
universal principles and methods to manage for quality. These methods:

The incorporation of customer focus in the business strategic plans and policies.

Developing a quality management system that includes a system to continuously create innovative new goods and services;
controls to ensure what was designed is produced and a system to continually improve the processes that produce goods,
services, and information.

Leaders have learned that to be competitive today the organization must move from thinking that managing quality is a "fad" or
that "we already did that" to "quality is a necessity and a given." The Juran universal principles of the management of quality is
as important as managing for finance. In both case the body of knowledge has evolved and advanced. In this newest edition of
Juan's Quality Handbook, we will highlight this evolution and provide clarity on some of the older methods.

Superior quality goods and services will result in sustainable financial results because goods and services that are superior to
the competitors' are salable. Goods and services that are salable because of quality continually drive revenue and maintain
lower costs, leading to greater profitability. The pursuit of superior quality by understanding the underlying universal methods
will transform the business and create a favorable quality and performance excellence culture.

Culture change does not happen haphazardly. Superiority in quality from a customer perspective does not just happen. The
business leaders must make quality happen. Quality happens when the organization sets the strategic direction with a
relentless pursuit to be the best in quality.

Organizations that attain superior results by designing, controlling, and continuously improving the quality of their goods and
services are often called world-class. They have achieved a state of performance excellence. Organizations that have attained a
state of superior quality are well respected by customers because their products and services exceed customers' expectations,
which leads to sustainable business results. This pursuit of excellence through quality management methods creates greater
customer, stakeholder, and employee satisfaction, which enables the organization to sustain performance over a longer term.

D.2.2. Managing Quality Should Not Be Optional

A common argument occurs among managers when asked, Does high quality cost more, or does high quality cost less?
Seemingly there is usually disagreement. One-half agree that it costs more, and the other half feel it costs less. Can they are
both right? Yes! The culprit is the word "quality." It is spelled the same way and pronounced the same way, but has multiple
meanings. To manage for superior quality and results, leaders must define the word "quality" from the perspective of customers
—those people who buy the goods, services, and even the reputation of your organization.

At one financial services company, the leaders would not support a proposal to reduce wasteful business processes because
the staff had labeled them quality improvement. Some of the leaders felt improving quality would cost more money. In their
view, higher quality meant higher cost. Others felt it would cost less. The subordinates were forced to rename the proposal
productivity improvement to secure approval and avoid confusion. Such confusion can be reduced if each organization makes
clear the distinction between the multiple meanings of the word "quality." However, some confusion is inevitable as long as we
use a single word to convey very different ideas.

Leaders must have a common understanding of quality so they can manage it. First, agree on the meaning of the word "quality"
as it applies to your business and its customers. Once defined, then it can be managed. If it can be managed, then it can be
provided to the satisfaction of customers and stakeholders. Without a common understanding of the word "quality," the
organization will continue to make many short-term initiatives to improve quality and it will lead to "initiative overload."

There have been efforts to clarify matters by adding supplemental words. There also have been efforts to coin a short phrase
that would clearly and simultaneously define both major meanings of the word "quality." A popular definition was first
presented by Joseph M. Juran. Quality was defined as meaning "fitness for use." Dr. Deming used "conformance to

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requirements." Robert Galvin, Chairman Emeritus of Motorola, used Six Sigma to distinguish the high level of quality as it related
to defects. Others stated that quality means world-class excellence, best-in-class and performance excellence.

To better reflect the service economy we have settled on quality to mean all goods and services must be "fitness for purpose."
The purpose is always defined by the customer using the good or service. Customers judge the quality of goods and services by
how well they meet their needs. These needs drive the purchase of goods and services. If an organization understands the
needs of its many customers, it should be able to design goods and services that are fit for purpose. No matter what the
organization produces—a good or a service—it must be fit for its purpose. To be fit for purpose, every good, service, and
interaction with customers must have the right features (characteristics of the good or service that satisfies customer needs)
and be free of failure (no rework, no waste, no complaints).

It is unlikely that any short phrase can provide the depth of meaning needed by leaders and managers who are faced with
choosing a course of action to improve business performance and quality. The best you can do is to understand the
distinctions set out in Table 0.1 and define quality based on these distinctions.

Table 0.1 The Meaning of Quality

Features That Meet Customer Needs Freedom from Failures

Higher quality enables organizations to Higher quality enables organizations to

• Increase customer satisfaction • Reduce error rates

• Make products salable • Reduce rework, waste

• Meet competition • Reduce field failures, warranty charges

• Increase market share • Reduce customer dissatisfaction

• Provide sales income • Reduce inspection, test

• Secure premium prices • Shorten time to put new products on the market

• Reduce risk • Increase yields, capacity

• Improve delivery performance

Major effect is on revenue. Major effect is on costs.

Higher quality costs more. Higher quality costs less.

Table 0.1 presents two of the many meanings of the word "quality." These two are of critical importance to managing for
quality.

D.2.3. Quality Impacts Costs and Revenue and Costs

First, quality has a big effect on costs. In this case, quality has come to mean freedom from troubles traceable to office errors,
factory defects, field failures, and so on. Higher quality means fewer errors, fewer defects, and fewer field failures. When
customers perceive a service or good as low quality, they usually refer to the failures, the defects, the poor response times, etc.
To increase this type of quality, an organization must master the universal of quality improvement. This is often called
breakthrough or Six Sigma. It is a systematic method to reduce the number of such deficiencies or the "costs of poor quality" to
create a greater level of quality and fewer costs related to it.

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Second, quality has an effect on revenue. In this case, higher quality means delivery of those features of the good or service that
respond better to customer needs. Such features make the product or service salable. Since the customers value the higher
quality, they buy it and you get revenue from it. It is well documented that being the quality leader can also generate premium
prices and greater revenue.

The effects on costs and on revenue interact with one another. Not only do goods or services with deficiencies add to
suppliers' and customers' costs, but also they discourage repeat sales. Customers who are affected by field failures are, of
course, less willing to buy again from the guilty supplier. In addition, such customers do not keep this information to
themselves—they publicize it so that it affects the decisions of other potential buyers, with negative effects on the sales
revenue of the supplier.

The effect of poor quality on organizational finances has been studied broadly. In contrast, study of the effect of quality on
revenue has lagged. This imbalance is even more surprising, since most upper managers give higher priority to increasing
revenues than to reducing costs. This same imbalance presents an opportunity for improving organization economics through
better understanding of the effect of quality on revenue.

D.2.4. Quality, Earnings, and the Stock Market

At the most senior levels of management and among board members, there is keen interest in financial metrics such as net
income and share price. It is clear that different levels of quality can greatly affect these metrics, but so do other variables.
Variables such as market choices, pricing, and financial policy can influence these metrics. Separating out the market benefits
of managing for quality has just become feasible.

During the early 1990s, some of the financial presses published articles questioning the merits of the Malcolm Baldrige
National Quality Award, Six Sigma, and other similar initiatives to improve performance. These articles were challenged with an
analysis of the stock price performance of organizations known to practice these methods. The Baldrige winners were
compared to the performance of the S&P 500 as a whole. The results were striking. The Malcolm Baldrige National Quality
Award winners outperformed the S&P 500. The Baldrige winners had advanced 89 percent, as compared to only 33 percent for
the broad Standard & Poor's Index of 500 stocks ("Betting to Win on the Baldie Winners," 1993, p. 8). This set of winners
became known as the "Baldie Fund."

The impact of the quality universals is also clear for organizations that are not measured by the performance of their asset
values. Michael Levinson, City Manager of 2007 Award Recipient for the City of Coral Springs, stated it this way: "People ask,
'Why Baldrige?' My answer is very simple: Triple A bond rating on Wall Street from all three ratings agencies, bringing capital
projects in on time and within budget, a 96 percent business satisfaction rating, a 94 percent resident satisfaction rating, an
overall quality rating of 95 percent, and an employee satisfaction rating of 97 percent … that's why we're involved with Baldrige."

D.2.5. Building Market Leadership

Market leadership is often the result of entering a new market first and gaining superiority. However, once superiority is gained,
it must be maintained through continuing product or service improvements, or it could be lost if another organization decides to
redefine that market by improving its quality. That supplier will gain superiority over the market leader and will become the
quality leader. Organizations that have attained this leadership have usually done so on the basis of a strategic choice. They
adopted a positive strategy to establish leadership as a formal business goal and then set out the means to reach that goal.
Once attained, quality leadership endures until there is clear cumulative evidence that some competitor has overtaken the
leadership. Lacking such evidence, the leadership can endure for decades and even centuries. However, superior quality can
also be lost through some catastrophic change.

The growth of competition in quality has stimulated the expansion of strategic business planning to include planning for quality
and quality leadership.

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D.2.6. Quality and Share of Market
Growth in market share is often among the highest goals of upper managers. Greater market share means higher sales volume.
In turn, higher sales volume accelerates return on investment disproportionally due to the workings of the break-even chart.

In Fig. 0.1, to the right of the break-even line, an increase of 20 percent in sales creates an increase of 50 percent in profit, since
the fixed costs do not increase. (Actually, constant costs do vary with volume, but not at all in proportion.) The risks involved in
increasing market share are modest, since the technology, product or service, facilities, market, and so on are already in
existence and of proved effectiveness.

Figure 0.1 Break-even chart. (Juran, J. M., Juran's Quality Handbook, 5th ed., McGraw-Hill, New
York, 1999, p. 7.13.)

D.2.7. Effect of Quality Superiority

Quality superiority can often be translated into higher share of market, but it always requires a special effort to do so. Superior
quality must be clearly based on the voice of the customer and the benefits the customer is seeking. If quality superiority is
defined only in terms of the company's internal standards, the customer may not perceive the value. For example, patients may
be willing to pay the extra cost to travel long distances to a top health care system such as the Mayo Clinic in the United States
rather than visit a local hospital because they perceive the superior clinical outcomes available at the Mayo Clinic.

D.2.8. Superiority Obvious to the Buyer

In such cases, the obvious superiority can be translated into higher share of market. This concept is fully understood by
marketers, and from time to time they have urged product or service developers to come up with product or service features,
which can then be promoted to secure higher share of market. Examples of such cases are legion.

D.2.9. Superiority Translatable into Users' Economics

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D.2.9. Superiority Translatable into Users' Economics
Some products or services are outwardly alike but have dissimilar performances. An obvious example is the difference in the
electric power consumption of appliances with otherwise identical features. In this and similar examples, it is feasible to
translate the technological difference into the language of money. Such translation makes it easier for amateurs in technology
to understand the significance of the quality superiority.

The superior reliability of a power tool can be translated into the language of money to secure a price premium. The superior
reliability could also have been used to secure higher share of market. The superior quality of a truck tire can be translated into
cost per unit of distance traveled.

The initiative to translate may also be taken by the buyer. Some users of grinding wheels keep records on wheel life. This is
then translated into money—grinding wheel costs per 1000 pieces processed. Such a unit of measure makes it unnecessary for
the buyer to become expert in the technology of abrasives.

Collectively, cases such as the above can be generalized as follows:

There is in fact a quality difference among competing product or services.

This difference is technological so that its significance is not understood by many users.

It is often possible to translate the difference into the language of money or into other forms within the users' systems of
values.

D.2.10. Superiority Minor but Demonstrable

In some cases, quality superiority can secure added share of market even though the competitive "inferior" product is
nevertheless fit for purpose.

A manufacturer of antifriction bearings refined its processes to such an extent that its product or services were clearly more
precise than those of the competitors. However, the competitors' product or services were fit for purpose, so no price
differential was feasible. Nevertheless, the fact of greater precision impressed the client's engineers and secured increased
share of market.

In consumer goods or services, even a seemingly small difference may be translated into increased market share if the
consumers are adequately sensitized to the differentials and value them.

An executive of a manufacturer of candy-coated chocolates seized on the fact that his product did not create chocolate
smudge marks on consumers' hands. He dramatized this in television advertisements by contrasting the appearance of the
children's hands after eating his and the competitors' (uncoated) chocolate. His share of market rose dramatically.

D.2.11. Superiority Accepted on Faith

Consumers can be persuaded to accept, on faith, assertions of good or service superiority, which they themselves are unable to
verify. An example was an ingenious market research on electric razors. The sponsoring organization (Schick) employed an
independent laboratory to conduct the tests. During the research, panelists shaved themselves twice, using two electric razors,
one after the other. On one day, the Schick razor was used first and a competing razor immediately after. On the next day, the
sequence was reversed. In all tests, the contents of the second razor were weighed precisely. The data clearly showed that
when the Schick was the second razor, its contents weighed more than those of the competitors. The implication was that
Schick razors gave a cleaner shave. Within a few months, the Schick share of market rose as follows:

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 September, 8.3 percent

December, 16.4 percent

In this case, the consumers had no way to verify the accuracy of the asserted superiority. They had the choice of accepting it on
faith or not at all. Many accepted it on faith.

D.2.12. No Quality Superiority

If there is no demonstrable quality superiority, then share of market is determined by marketing skills. These take such forms
as persuasive value propositions, attractive packaging, and so on. Price reductions in various forms can provide increases in
share of market, but this is usually temporary. Competitors move promptly to take similar action. Such price reduction can have
a permanent effect if the underlying cost of production has also been reduced as the result of process improvements that give
the company a competitive cost edge over its competitors.

D.2.13. Carryover of Failure-Prone Features

Market leadership can be lost by perpetuating failure-prone features of predecessor models. The guilty features are well known,
since the resulting field failures keep the field service force busy restoring service. Nevertheless, there has been much carryover
of failure-prone features into new models. At the least, such carryover perpetuates a sales detriment and a cost burden. At its
worst, it is a cancer that can destroy seemingly healthy product or service lines.

A notorious example was the original xerographic copier. In that case, the "top 10" list of field failure modes remained
essentially identical, model after model. A similar phenomenon existed for years in the automobile industry.

The reasons behind this carryover have much in common with the chronic internal wastes that abound in so many
organizations:

The alarm signals are disconnected. When wastes continue, year after year, the accountants incorporate them into the
budgets. That disconnects the alarm signals—no alarms ring as long as actual waste does not exceed budgeted waste.

There is no clear responsibility to get rid of the wastes. There are other reasons as well. The technologists have the
capability to eliminate much of the carryover. However, those technologists are usually under intense pressure from the
marketers to develop new product or service and process features in order to increase sales. In addition, they share distaste
for spending their time cleaning up old problems. In their culture, the greatest prestige comes from developing the new.

The surprising result can be that each department is carrying out its assigned responsibilities, and yet the product or service
line is dying. Seemingly nothing short of upper management intervention—setting goals for getting rid of the carryover—can
break up the impasse.

D.2.14. Changes in Customer Habits

Customer habits can be notoriously fickle. Obvious examples are fashions in clothing or concerns over health. Consumerism is
now driving lifestyles. Many people have reduced their consumption of beef and increased that of poultry and fish. Such shifts
are not limited to consumers. Industrial organizations often launch "drives," most of which briefly take center stage and then
fade away. The associated buzzwords similarly come and go.

D.2.15. The Twentieth Century and Quality

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The twentieth century witnessed the emergence of some massive new forces that required responsive action. These forces
included an explosive growth in science and technology; threats to human safety, health, and the environment; the rise of the
consumerism movement; and intensified international competition in quality.

D.2.16. Explosive Growth in Technology

This growth made possible an outpouring of numerous benefits to human societies: longer life spans, superior communication
and transport, reduced household drudgery, new forms of education and entertainment, and so on. Huge new industries
emerged to translate the new technology into these benefits. Nations that accepted industrialization found it possible to
improve their economies and the well-being of their citizenry.

The new technologies required complex designs and precise execution. The empirical methods of earlier centuries were unable
to provide appropriate product and process designs, so process yields were low and field failures high. Organizations tried to
deal with low yields by adding inspections to separate the good from the bad. They tried to deal with field failures through
warranties and customer service. These solutions were costly, and they did not reduce customer dissatisfaction. The need was
to prevent defects and field failures from happening in the first place.

D.2.17. Threats to Human Safety, Health, and the Environment

With benefits from technology came uninvited guests. To accept the benefits required changes in lifestyle, which, in turn, made
quality of life dependent on continuity of service. However, many products were failure-prone, resulting in many service
interruptions. Most of these were minor, but some were serious and even frightening—threats to human safety and health as
well as to the environment.

Thus the critical need became quality. Continuity of the benefits of technology depended on the quality of the goods and
services that provided those benefits. The frequency and severity of the interruptions also depended on quality—on the
continuing performance and good behavior of the products of technology. This dependence came to be known as "life behind
the quality dikes."

D.2.18. Consumer Movement

Consumers welcomed the features offered by the new products but not the associated new quality problems. The new
products were unfamiliar—most consumers lacked expertise in technology. Their senses were unable to judge which of the
competing products to buy, and the claims of competing organizations often were contradictory.

When products failed in service, consumers were frustrated by vague warranties and poor service. "The system" seemed
unable to provide recourse when things failed. Individual consumers were unable to fight the system, but collectively they were
numerous and hence potentially powerful, both economically and politically. During the twentieth century, a "consumerism"
movement emerged to make this potential a reality and to help consumers deal more effectively with these problems. This
same movement also was successful in stimulating new government legislation for consumer protection.

D.2.19. Intensified International Competition in Quality

Cities and countries have competed for centuries. The oldest form of such competition was probably in military weaponry. This
competition then intensified during the twentieth century under the pressures of two world wars. It led to the development of
new and terrible weapons of mass destruction.

A further stimulus to competition came from the rise of multinational organizations. Large organizations had found that foreign

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trade barriers were obstacles to export of their products. To get around these barriers, many set up foreign subsidiaries that
then became their bases for competing in foreign markets, including competition in quality.

The most spectacular twentieth-century demonstration of the power of competition in quality came from the Japanese.
Following World War II, Japanese organizations discovered that the West was unwilling to buy their products—Japan had
acquired a reputation for making and exporting shoddy goods. The inability to sell became an alarm signal and a stimulus for
launching the Japanese quality revolution during the 1950s. Within a few decades, that revolution propelled Japan into a
position of world leadership in quality. This quality leadership in turn enabled Japan to become an economic superpower. It was
a phenomenon without precedent in industrial history.

D.2.20. The Twenty-First Century and Quality

The cumulative effect of these massive forces has been to "move quality to center stage." Such a massive move logically
should have stimulated a corresponding response—a revolution in managing for quality. However, it was difficult for
organizations to recognize the need for such a revolution—they lacked the necessary alarm signals. Technological measures of
quality did exist on the shop floors, but managerial measures of quality did not exist in the boardrooms. Thus, except for Japan,
the needed quality revolution did not start until very late in the twentieth century. To make this revolution effective throughout
the world, economies will require many decades—the entire twenty-first century. Thus, while the twentieth century has been the
"century of productivity," the twenty-first century will be known as the "century of quality."

The failure of the West to respond promptly to the need for a revolution in quality led to a widespread crisis. The 1980s then
witnessed quality initiatives being taken by large numbers of organizations. Most of these initiatives fell far short of their goals.
However, a few were stunningly successful and produced the lessons learned and role models that will serve as guides for the
West in the decades ahead.

Today all countries can attain superiority in quality. The methods, tools, and know-how exist. A country that is an emerging
country today may provide higher quality than one that has been producing it for centuries. Today, and into the foreseeable
future, all organizations in all industries must continue to strive for perfection.

An organization that creates high-quality goods and services will be positively impacted in two ways. First, quality can affect
financial results because superior products and services are more salable; thereby, increasing sales and lowering costs and
thus leading to greater profitability. Second, the pursuit of high quality transforms a culture. This happens after repeated
success in eliminating poor quality, process waste, and customer dissatisfaction. The transformational changes required of an
organization do not happen haphazardly. They are a result of an organization's unyielding pursuit to be the best in quality and
implementing a systematic method to get there. This distinction has had multiple names over the decades. Organizations that
attain superior results, by designing and continuously improving the quality of their goods and services, are often called world
class, best practices, vanguard companies, and most recently performance excellence. We define this as an organization that
has attained a state of performance excellence because its products and services exceed customers' expectations; they are
regarded by their peers and have superior, sustainable results.

This quest of performance excellence through quality creates high stakeholder and employee satisfaction, which enables the
organization to sustain the pursuit for the long term. These organizations have reached a state of performance excellence.

D.3. Market Quality Leadership and Business Strategy

Market leadership is often the result of entering a new market first and gaining superiority that marketers call a franchise. Once
gained, this franchise can be maintained through continuing product or service improvement and effective promotion. However,
another organization may decide to redefine that market by improving the performance of the good or service—improving its

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quality—and gaining superiority over the market leader. Then it becomes the "quality leader" in the eyes of the customers.
Organizations that have attained this leadership have usually done so on the basis of two principal strategies:

1. Let nature take its course. In this approach, organizations apply their best efforts, hoping that in time these efforts will be
recognized as the leader creates a failure or gives up its position.

2. Help nature out by adopting a positive strategy—establish leadership as a formal business goal and then set out to reach
that goal. That goal, once attained, can lead to superior results and sustain that position for long periods.

Those who decided to take action to make superior quality a formal goal soon found that they also had to answer the question,
"Leadership in what?" Leadership in quality can exist in any of the multiple aspects of fitness for purpose, but the focus of the
organization will differ depending on which aspects are chosen. If quality leadership is to consist of

Superior quality of design

Superior quality of conformance

Availability

Guarantees

Speed of field repairs

Then the organization must focus on

Product development of its goods and services

Strong quality control and systematic quality improvement

Operational controls

Reliability and maintainability programs

Creation of a field service capability that is rapid and free of defects

Once attained, quality leadership endures until there is clear cumulative evidence that some competitor has overtaken the
leadership. Lacking such evidence, the leadership can endure for decades and even centuries. However, superior quality can
also be lost through some catastrophic change.

A brewery reportedly changed its formulation in an effort to reduce costs. Within several years, its share of market declined
sharply. The original formula was then restored but market share did not recover. (See "The Perils of Cutting Quality," 1982.)

In some cases, the quality reputation is built not around a specific organization but around an association of organizations. In
that event, this association adopts and publicizes some mark or symbol. The quality reputation becomes identified with this
mark, and the association goes to great lengths to protect its quality reputation.

The medieval guilds imposed strict specifications and quality controls on their members. Many medieval cities imposed "export
controls" on selected finished goods in order to protect the quality reputation of the city (Juran 1995).

The growth of competition in quality has stimulated the expansion of strategic business planning to include planning for quality
and quality leadership. One approach to superior quality is through product development in collaboration with the leading user
of the goods or services—a user who is influential in the market and hence is likely to be followed. For example, in the medical
field, an individual is "internationally renowned; a chairman of several scientific societies; is invited to congresses as speaker or
chairman; writes numerous scientific papers" (Ollson 1986). Determining the identity of the leading user requires some analysis.
(In some respects, the situation is similar to the sales problem of discovering who within the client organization is the most
influential in the decision to buy.) Ollson lists 10 leader types, each playing a different role.

D.3.1. Consumer Preference and Share of Market

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D.3.1. Consumer Preference and Share of Market
Consumers rely heavily on their own senses to aid them in judging quality. This fact has stimulated research to design means
for measuring quality by using human senses as measuring instruments. This research has led to development of objective
methods for measuring consumer preference and other forms of consumer response. A large body of literature is now
available, setting out the types of sensory tests and the methods for conducting them.

At first, these methods were applied to making process control and product or service acceptance decisions. But the
applications were soon extended into areas such as consumer preference testing, new-product or new-service development,
advertising, and marketing.

For some products or services, it is easy to secure a measure of consumer preference through "forced-choice" testing. For
example, a table is set up in a department store and passersby are invited to taste two cups of coffee, A and B, and to express
their preference. Pairs of swatches of carpet may be shown to panels of potential buyers with the request that they indicate
their preferences. For comparatively simple consumer goods or services, such tests can secure good data on consumer
preference. More complex products such as insurance or financial instruments may require more sophisticated analysis such
as conjoint analysis or discrete choice methods.

The value of consumer preference data is greatly multiplied through correlation with data on share of market. Figure 0.2 shows
such a correlation for 41 different packaged consumer food products. This was an uncommonly useful analysis and deserves
careful study.

Figure 0.2 Consumer preference versus share of market. (Juran, J. M., Juran's Quality Handbook,
5th ed., McGraw-Hill, New York, 1999, p. 7.17.)

Each dot on Fig. 0.2 represents a food product sold on supermarket shelves. Each product has competitors for the available
shelf space. The competing products sell for identical prices and are packaged in identically sized boxes containing identical
amounts of product or service. What may influence the consumer?

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 The contents of the package, as judged by senses and usage, which may cause the consumer to prefer product A over
product B

The marketing features such as attractiveness of the package, appeal of prior advertising, and reputation of the
manufacturer

In Fig. 0.2 the horizontal scale shows consumer preference over the leading competitor as determined by statistically sound
preference testing. The vertical scale shows the share of market versus the leading competitor, considering the two as
constituting 100 percent.

In Fig. 0.2 no product showed a consumer preference below 25 percent or above 75 percent. The 75/25 preference levels mean
that the product is so superior (or inferior) that three users out of four can detect the difference. Since all other factors are
essentially equal, this result implies that a product that is preferred by more than 75 percent of consumers eventually takes over
the entire market, and its competition disappears.

In contrast to the vacant areas on the horizontal scale of consumer preference, the vertical scale of share of market has data
along the entire spectrum. One product (marked A in Fig. 0.2) lies squarely on the 50 percent consumer preference line, which
probably means (under forced-choice testing) that the users are guessing as to whether they prefer that product or service or
that of its competitor. Yet product or service A has only 10 percent share of market and its competitor has 90 percent. In
addition, this inequality in share of market has persisted for years. The reason is that the 90 percent organization was the first
to bring that product to market. As a result, it acquired a "prior franchise" and has retained its position through good promotion.

The conclusion is that when competing products or services are quite similar in consumer preference, any effect of such small
quality differentials is obscured by the effect of the marketing skills. In consequence, it is logical to conclude that when quality
preferences are evident to the user, such quality differences are decisive in share of market, all other things being equal. When
quality differences are slight, the decisive factor in share of market is the marketing skills.

As a corollary, it appears that organizations are well advised to undertake quality improvements, which will result in either (1)
bringing them from a clearly weak to an acceptable preference or (2) bringing them from an acceptable preference to a clearly
dominant preference. However, organizations are not well advised to undertake quality improvements that will merely make
minor improvements that are not largely perceived and valued by their customers, since marketing skill is usually the dominant
factor in determining the share of market when the differences in quality are small.

It is easy for technologists to conclude that what they regard as important in the good or service is also of prime concern to the
user. In the carpet industry, the engineers devote much effort to improving wear qualities and other technological aspects of
fitness for purpose. However, after a market research study was conducted, it was determined that consumers' reasons for
selecting carpets were primarily sensory, and not durability:

• Color 56 percent

• Pattern 20 percent

• Other sensory qualities 6 percent

• Non-sensory qualities 18 percent

For more complex consumer goods or services it is feasible, in theory, to study the relation of quality to market share by
securing quantitative data on (1) actual changes in buying patterns of consumers and (2) actions of suppliers that may have
created these changes. In practice, such information is difficult to acquire. It is also difficult to conclude, in any one instance,
why the purchase was of model A rather than B. What does emerge are demographic patterns, that is, age of buyers, size of
family, and so on, that favor model A rather than B. For goods or services sold through merchants, broad consumer
dissatisfaction with quality can translate into merchant preference, with extensive damage to share of market.

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A maker of household appliances was competitive with respect to product or service features, price, and promptness of
delivery. However, it was not competitive with respect to field failure, and this became a major source of complaints from
consumers to the merchants. Within several years the maker (B) lost all its leadership in share of market, as shown in the table
below. Table 0.2 stimulated the upper managers of organization B to take action to improve its product reliability.

Table 0.2 Consumer Preference

Leaders in Market Share during:

Model Price Base Year Base Year Plus 1 Base Year Plus 2 Base Year Plus 3

High A C C C

Medium B B C C

Low C C C C

Special B B B C

D.3.2. Industrial Products and Share of Market

Industrial goods or services are sold more on technological performance than on sensory qualities. However, the principle of
customer preference applies, as does the need to relate quality differences to customer preference and to share of market.

D.3.3. Quality and Competitive Bidding

Many industrial products are bought through competitive bidding. Most government agencies are required by law to secure
competitive bids before awarding large contracts. Industrial organizations require their purchasing managers to do the same.
The invitations to bid usually include the parameter of quality, which may be specified in detail or through performance
specifications.

To prospective suppliers the ratio of awards to bids is of great significance. The volume of sales and profit depends greatly on
this ratio. In addition, the cost of preparing bids is substantial. Finally, the ratio affects the morale of the people involved.
(Members of a winning team fight with their competitors; members of a losing team fight with one another.) It is feasible to
analyze the record of prior bids in order to improve the percentage of successful bids. Table 0.3 shows such an analysis
involving 20 unsuccessful bids.

Table 0.3 Analysis of Unsuccessful Bids

Bid Not Accepted Due to

Contract Proposal Quality of Design Product Price Installation Price Reciprocal Buying Other

X = contributing reasons; XX = main reason.

Only 14 bids were made for installation.

Source: Juran, J. M., Juran's Quality Handbook, 5th ed., McGraw-Hill, New York, 1999.

A1 X X X

A2 XX

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 Bid Not Accepted Due to

Contract Proposal Quality of Design Product Price Installation Price Reciprocal Buying Other

A3 XX X

A4 XX X

A5 XX

A6 XX

A7 XX

A8 XX

A9 XX

A10 XX

B1 X X

B2 XX

B3 XX

B4 XX

B5 X X

B6 X XX

B7 XX

B8 X X

B9 X

B10 X X X

Totals 7 8 10 (out of 14) 4 1

To create Table 0.3, a multifunctional team analyzed 20 unsuccessful bids. It identified the main and contributing reasons for
failure to win the contract. The team's conclusions show that the installation price was the most influential factor—it was a
contributing cause in 10 of the 14 cases. This finding resulted in a revision of the process for estimating the installation price
and an improvement in the bidding/award ratio.

D.4. Macroeconomic Influences on Results

The ability of an organization to secure revenue is strongly influenced by the economic climate and by the cultural habits that
have evolved in various economies. These overriding influences affect product or service quality as well as other elements of
commerce.

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D.4.1. National Affluence and Organization
The form of a nation's economy and its degree of affluence strongly influence the approach to its problems.

D.4.2. Subsistence Economies

In subsistence economies, the numerous impoverished users have little choice but to devote their revenue to basic human
needs. Their protection against poor quality is derived more from their collective political power than from their collective
economic power. Much of the world's population remains in a state of subsistence economy.

D.4.3. Shortages and Surpluses

In all economies, a shortage of goods (a "sellers' market") results in a relaxing of quality standards. The demand for goods
exceeds the supply, so users must take what they can get (and bid up the price to boot). In contrast, a buyers' market results in
a tightening of quality standards.

D.4.4. Life with the Risk of Failure

As societies industrialize, they revise their lifestyle in order to secure the benefits of technology. Collectively, these benefits
have greatly improved the quality of life, but they have also created a new dependence. In the industrial societies, great masses
of human beings place their safety, health, and even their daily well-being behind numerous "quality dikes." For instance, many
pharmaceuticals often enable a person to receive quick short-term health benefits, but in the long term the illness may get
worse.

D.4.5. Voluntary Obsolescence

As customers acquire affluence, economic organizations increasingly bring out new goods or services (and new models of old
products) that they urge prospective users to buy. Many of the users who buy these new models do so while possessing older
models that are still in working order. This practice is regarded by some reformers as a reprehensible economic waste.

In their efforts to put an end to this asserted waste, the reformers have attacked the organizations who bring out these new
models and who promote their sale. Using the term "planned obsolescence," the reformers imply (and state outright) that the
large organizations, by their clever new models and their powerful sales promotions, break down the resistance of the users.
Under this theory, the responsibility for the waste lies with the organizations that create the new models.

In the experience and judgment of the author, this theory of planned obsolescence is mostly nonsense. The simple fact, obvious
to both producers and consumers, is that the consumer makes the decision (of whether to discard the old product or service
and buy the new). Periodically, this fact is dramatized by some massive marketing failure.

The early models of home refrigerators lacked many features of modern models: freezer compartments, ice cube makers,
shelves in the door, and so on. As these features were added to new models, homeowners who had bought the original
models became increasingly unhappy until they bought a new model despite the fact that the old model was still running.
Note that the decision to buy the new model was made by the customer, not by the manufacturer.

The latter half of the 1970s saw the introduction of recorded entertainment into the home of the consumer with the creation
of the video cassette recorder (VCR). For two decades this invention was a staple in millions of people's domestic lives
across the globe. The introduction of the digital video disc (DVD) player, a machine whose ultimate utility was the same as a
VCR, replaced it within years, not decades. Offered improved quality and additional features but with the same basic

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 function as a VCR, consumers chose the DVD even when they already had an operating appliance with equivocal
functionality in their homes. New forms of downloadable video through the Internet are beginning to revolutionize this
market again.

D.4.6. Involuntary Obsolescence

A very different category of obsolescence consists of cases in which long-life products contain failure-prone components that
will not last for the life of the product or service. The life of these components is determined by the manufacturer's design. As a
result, even though the user decides to have the failed component replaced (to keep the product or service active), the
manufacturer has made the real decision because the design determined the life of the component.

This situation is at its worst when the original manufacturer has designed the product or service in such a way that the supplies,
spare parts, and so on are nonstandard, so that the sole source is the original manufacturer. In such a situation, the user is
locked into a single source of supply. Collectively, such cases have lent themselves to a good deal of abuse and have
contributed to the consumerism movement.

D.5. Contrast in Views: Customers' and Producers'

Industrial organizations derive their revenue from the sale of their goods or services. These sales are made to "customers," but
customers vary in their functions. Customers may be wholesalers, processors, ultimate users, and so on, with resulting
variations in customer needs. Response to customer needs in order to sell more goods or services requires a clear
understanding of just what those needs are and how the organization can meet them.

Human needs are complex and extend beyond technology into social, artistic, status, and other seemingly intangible areas.
Suppliers are nevertheless obliged to understand these intangibles in order to be able to provide products or services that
respond to such needs.

D.5.1. The Spectrum of Affluence

In all economies the affluence of the population varies across a wide spectrum. Suppliers respond to this spectrum through
variations in product or service features. These variations are often called grades.

For example, all hotels provide overnight sleeping accommodations. Beyond this basic service, hotels vary remarkably in their
offerings, and the grades (deluxe suites, four-star, and so on) reflect this variation. In like manner, any model of automobile
provides the basic service of point-to-point transportation. However, there are multiple grades of automobiles. There are luxury
brands such as Porsche, BMW, Mercedes, Cadillac, and Lexus; and there are more affordable ones such as GM, Hyundai, Ford,
and Toyota. The higher grades supply services beyond pure transportation. They may provide more features that result in
higher levels of safety, comfort, appearance, and status.

D.5.2. Fitness for Purpose and Conformance to Specification

Customers and suppliers sometimes differ in their definition of quality. Such differences are an invitation to trouble. To most
customers, quality means those features of the product or service that respond to customer needs. In addition, quality includes
freedom from failures, plus good customer service if failures do occur. One comprehensive definition for the above is "fitness
for purpose."

In contrast, for years many suppliers had defined quality as conformance to specification at the time of final test. This definition
fails to consider numerous factors that influence quality as defined by customers: packaging, storage, transport, installation,

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reliability, maintainability, customer service, and so on.

Table 0.4 tabulates some of the differences in viewpoint as applied to long-life goods.

Table 0.4 Contrasting Views: Customers' and Producers'

Aspects Principal Views

Of Customers Of Producers

What is purchased? A product needed by the customer Goods made by the producer

Definition of quality Fitness for purpose during the life of the product or service Conformance to specification on final test

Cost Cost of use, including Cost of producers

• Purchase price

• Operating costs

• Maintenance

• Downtime

• Depreciation

• Loss on resale

Responsibility for keeping in service Over the entire useful life During the warranty period

Spare parts A necessary evil A profitable business

The ongoing revolution in quality has consisted in part of revising the suppliers' definition of quality to conform more nearly to
the customers' definition.

D.5.3. Cost of Use

For consumable goods or many services, the purchase price paid by the customer is quite close to the cost of using
(consuming) the good or service. However, for long-lived product or services, the cost of use can diverge considerably from the
purchase price because of added factors such as operating costs, maintenance costs, downtime, depreciation, license fees,
new releases, and transaction service charges.

The centuries-old emphasis on purchase price has tended to obscure the subsequent costs of use. One result has been
suboptimization; that is, suppliers optimize their costs rather than the combined costs of suppliers and customers.

The concept of life-cycle costing offers a solution to this problem, and progress is being made in adopting this concept.

D.5.4. Degrees of User Knowledge

In a competitive market, customers have multiple sources of supply. Quality is an obvious consideration when making a
purchasing choice or decision. However, customers vary greatly in their ability to evaluate quality, especially prior to purchase.
Table 0.5 summarizes the extent of customer knowledge and strength in the marketplace as related to quality matters.

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Table 0.5 Customer Influences on Quality

Aspects of the Problem Original Equipment Manufacturers Dealers and Repair Shops Consumers
(OEMs)

Source: Juran, J. M., Juran's Quality Handbook, 5th ed., McGraw-Hill, New York, 1999, p. 7.5.

Makeup of the market A few, very large customers Some large customers plus many Very many, very small
smaller ones customers

Economic strength of any Very large, cannot be ignored Modest or low Negligible
one customer

Technological strength of Very high; has engineers and Low or nil Nil (requires tech assistance)
customer laboratories

Political strength of customer Modest or low Low or nil Variable, but can be very great
collectively

Fitness for purpose is judged Qualification testing Absence of consumer complaints Successful usage
mainly by:

Quality specifications Customers Manufacturer Manufacturer

dominated by:

Use of incoming inspection Extensive test for conformance to Low or nil for dealers; in-use tests by In-use test
specification repair shops

Collection and analysis of Good to fair Poor to nil Poor to nil

failure data

The broad conclusions that can be drawn from Table 0.5 are as follows:

Original equipment manufacturers (OEMs) can protect themselves through their technological and/or economic power as
much as through contract provisions. Merchants and repair shops must rely mainly on contract provisions supplemented by
some economic power.

Small users have very limited knowledge and protection. The situation of the small user requires some elaboration.

With some exceptions, small users do not fully understand the technological nature of the product or service. The user does
have sensory recognition of some aspects of fitness for use: the bread smells fresh-baked, the radio set has clear reception, the
shoes are good-looking. Beyond such sensory judgments, and especially concerning the long-life performance of the product or
service, the small user must rely mainly on prior personal experience with the supplier or merchant. Lacking such prior
experience, the small user must choose from the propaganda of competing suppliers plus other available inputs (neighbors,
merchants, independent laboratories, and so on).

To the extent that the user does understand fitness for use, the effect on the supplier's revenue is influenced as follows:

In Table 0.6, the terms "fitness for purpose," "inferior," "competitive," and "superior" all relate to the situation as seen by the
user. (The foregoing table is valid as applied to both large customers and small users.)

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Table 0.6 Consumer Preference Effect on Income

Perception of the User, the Product or Service Is The Resulting Income to the Supplier Is

Not fit for purpose None, or in immediate jeopardy

Fit for purpose, but noticeably inferior to competitive products Low due to loss of market share or need to lower prices

Fit for purpose and competitive At market prices

Noticeably superior to competitive products High due to premium prices or greater share of market

D.5.5. Stated Needs and Real Needs

Customers state their needs as they see them, and in their language. Suppliers are faced with understanding the real needs
behind the stated needs and translating those needs into suppliers' language.

It is quite common for customers to state their needs in the form of goods, when their real needs are for the services provided
by those goods (see Table 0.7). For example:

Table 0.7 Stated Needs versus Real Needs

Stated Needs of Customer Real Needs of Customer

Food A pleasant taste and nourishment

An automobile Transportation, safety, comfort

A flat screen TV Entertainment, news, movies in the home

Toothpaste Clean teeth, sweet breath, etc.

7/24 Banking Ability to deposit or get money anytime as needed

Preoccupation with selling goods can divert attention from the real needs of customers.

In the classic, widely read paper "Marketing Myopia," Levitt (1960) stressed service orientation as distinguished from product
orientation. In his view, the railroads missed an opportunity for expansion due to their focus on railroading rather than on
transportation. In like manner, the motion picture industry missed an opportunity to participate in the growing television industry
due to its focus on movies rather than on entertainment (Levitt 1960).

Understanding the real needs of customers requires answers to questions such as these: Why are you buying this product or
service? What service do you expect from it?

D.5.6. Psychological Needs

For many products or services, customer needs extend beyond the technological features of the good or service; customer
needs also include matters of a psychological nature. Such needs apply to both goods and services. A person in need of a
haircut has the option of going to (1) a "shop" inhabited by "barbers" or (2) a "salon" inhabited by "hair stylists." Either way,

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she/he is cut by a skilled artisan. Either way, her/his resulting outward appearance is essentially the same. What differs is
her/his remaining assets and her/his sense of well-being (Juran 1984).

What applies to services also applies to physical goods. There are factories in which chocolate-coated candies are conveyed
by a belt to the packaging department. At the end of the belt are two teams of packers. One team packs the chocolates into
modest cardboard boxes destined for budget-priced merchant shops. The other team packs the chocolates into satin-lined
wooden boxes destined to be sold in deluxe shops. The resulting price for a like amount of chocolate can differ by several fold.
The respective purchasers encounter other differences as well: the shop decor, level of courtesy, promptness of service, sense
of importance, and so on. However, the goods are identical. Any given chocolate on that conveyer belt has not the faintest idea
of whether it will end up in a budget shop or in a deluxe shop.

Technologists may wonder why consumers are willing to pay such price premiums when the goods are identical. However, for
many consumers, the psychological needs are perceived as real needs, and the consumers act on their perceptions. Most
suppliers design their marketing strategies to respond to customers' perceived needs.

D.5.7. "User-Friendly" Needs

The "amateur" status of many users has given rise to the term "user-friendly" to describe a condition that enables amateurs to
use technological and other complex product or services with confidence. Consider the following example.

The language of published information should be simple, unambiguous, and readily understood. Notorious offenders have
included legal documents, owners' operating manuals, forms to be filled out, and so on. Widely used forms (such as federal tax
returns) should be field-tested on a sample of the very people who will later be faced with filling out the forms.

Goods or services should be broadly compatible. Much of this has been done through standardization committees or through
natural monopolies. An example of the lack of such compatibility during the 1980s was the personal computer—many personal
computers were able to "talk" to computers made by the same manufacturer but not to computers made by other
manufacturers.

D.5.8. The Need to Be Kept Informed

Customers sometimes find themselves in a state of uncertainty: Their train is late, and they don't know when to expect it; there
is a power outage, and they don't know when power will be restored. In many such cases, the supplier organization has not
established the policies and processes needed to keep customers informed. In actuality, customers, even if kept informed,
usually have no choice but to wait it out. Nevertheless, being kept informed reduces the anxiety—it provides a degree of
assurance that human beings are aware of the problem and that it is in the process of being solved.

The New York City subway system rules require conductors to explain all delays lasting 2 minutes or more. One survey reported
that this rule was followed only about 40 percent of the time. A City Hall report concluded that "shortage of information is a
significant source of public antagonism toward the Transit Authority" (Levine 1987).

In contrast, some airlines go to pains to keep their customers informed of the reasons for a delay and of the progress being
made in providing a remedy.

A different category of cases involves organizations secretly taking actions adverse to quality but without informing the
customer. The most frequent are those in which goods or services not conforming to specification are shipped to unwary
customers. In the great majority of such cases, the products or services are fit for use despite the nonconformance. In other
cases, the matter may be debatable. In still other cases, the act of shipment is at least unethical and at worst illegal.

The partnership between Firestone Tires and Ford Explorer SUVs in the late 1990s created one of the most defective and
ultimately deadly relationships in modern automotive history. Firestone tires were continually failing under the frame of the

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Ford Explorer, often causing the SUV to flip and roll. More than 250 people lost their lives because of this defect while 3000
other incidents were reported due to this imperfection. What made this situation sordid was the fact that neither Ford nor
Firestone took responsibility for this obvious problem. Ford Explorers with Firestone tires were still being sold to the general
public even when, in the early stages, unusually high rates of crashes were taking place. Instead of recalling the models in
question, the manufacturer let this problem persist for years until the incident rate and death count became so high that the
problem could not be ignored further.

Once discovered, any secretive actions tend to arouse suspicions, even if the product or service is fit for customer use. The
customers wonder, "What else has been done secretly without our being informed?"

The usual reason for not informing the customer is a failure to raise the question, What shall we tell the customers? It would
help if every nonconformance document included a blank space titled "What is to be communicated to the customers?" The
decision may be to communicate nothing, but at least the question has been asked.

D.5.9. Cultural Needs

The needs of customers, especially internal customers, include cultural needs—preservation of status, continuity of habit
patterns, and still other elements of what is broadly called the cultural pattern. Some of the inability to discover customer needs
is traceable to failure to understand the nature and even the existence of the cultural pattern.

Cultural needs are seldom stated openly—mostly they are stated in disguised form. A proposed change that may reduce the
status of some employee will be resisted by that employee. The stated reasons for the resistance will be on plausible grounds,
such as the effect on costs. The real reason will not emerge. No one will say, "I am against this because it will reduce my
status." Discovery of the real needs behind the stated needs is an important step toward a meeting of the minds. (For
elaboration on the nature of cultural patterns and the "rules of the road."

D.5.10. Needs Traceable to Unintended Use

Many quality failures arise because the customer uses the product or service in a manner different from that intended by the
supplier. This practice takes many forms:

Untrained patient care workers are assigned to processes requiring trained workers.

Equipment is overloaded or is allowed to run without adherence to maintenance schedules.

The product or service is used in ways never intended by the supplier. For instance, a screwdriver is used as a hammer. It
was not designed to hit things! It can break and cause harm to the user.

All this influences the relationship between quality and revenue. The critical question is whether the product or service or
service development should be based on intended use or actual use. The latter often requires adding a factor of safety during
the development. For example:

Fuses and circuit breakers are designed into electrical circuits for protection against overloads.

Spell-check software is designed to detect grammar and spelling errors.

Public utility invoicing may include a check of customers' prior usage to guard against errors in reading the meters.

Such factors of safety may add to the cost. Yet they may well result in an optimal overall cost by helping to avoid the higher
cost arising from actual use or misuse.

D.6. Needs Related to Dissatisfaction

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D.6. Needs Related to Dissatisfaction
When products or services fail to meet the needs of their customers, a new set of customer needs arises—how to restore
service and get compensated for the associated losses and inconvenience. These new needs are communicated through
customer complaints, which then are acted on by special departments such as customer service or call centers. Inadequate
organizational response to consumer complaints and to the terms of warranties has contributed importantly to the rise of the
"consumerism" movement.

Studies of how to respond to customer complaints have identified the key features of a response system that meets customer
needs.

Complaints also affect product or service salability. This has been researched in studies commissioned by the U.S. Office of
Consumer Affairs. The findings may be summarized as follows:

Of customers who were dissatisfied with products or services, nearly 70 percent did not complain. The proportions varied
with the type of product or service involved. The reasons for not complaining included these: the effort to complain was not
worth it; the customers believed that complaining would do no good; customers lacked knowledge of how to complain.

Over 40 percent of the complaining customers were unhappy with the responsive action taken by the suppliers. Here again
the percentage varied according to the type of product or service involved.

Future salability is strongly influenced by the action taken on complaints. Figure 0.3 shows broadly the nature of consumer
behavior following dissatisfaction with a purchase. This strong influence extends to brand loyalty. Figure 0.4 shows the extent
of this influence as applied to large-ticket durable goods, financial services, and automobile services, respectively.

Figure 0.3 Behaviors of consumers after they experience product dissatisfaction. (Planning for
Quality, 2d ed., Juran Institute, 1990, pp. 4–12.)

Figure 0.4 Consumer loyalty versus complaint resolution: large ticket durable goods, financial
services, automotive services. (Planning for Quality, 2d ed., Juran Institute, 1990, pp. 4–14.)

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That same research concluded that an organized approach to complaint handling provides a high return on investment. The
elements of such an organized approach may include

A response center staffed to provide 24/7 access by consumers

A toll-free telephone number

A computerized database

Special training for the personnel who answer the telephones

Active solicitation of complaints to minimize loss of customers in the future

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D.7. Discovering Hidden Customer Needs
The most simplistic assumption is that customers are completely knowledgeable as to their needs and that market research
can be used to extract this information from them. In practice, customer knowledge can be quite incomplete. In some cases, the
customer may be the last person to find out. It is unlikely that any customer ever expressed the need for a Walkman (a
miniature, portable audiotape player) before such devices came on the market. However, once they became available, many
customers discovered that they needed one.

These gaps in customer knowledge are filled in mainly by the forces of the competitive market and by the actions of
entrepreneurs.

D.7.1. Inferior Available Product or Services

When available products are perceived as inadequate, a vacuum waiting to be filled emerges. Human ingenuity then finds ways
to fill that vacuum:

The number of licensed New York taxicabs has remained frozen for years while the population has increased. The resulting
shortage of cabs has been filled by unlicensed cabs, limousines, buses, and even bicycles.

Government instructions for filling out tax forms have been confusing to many taxpayers. One result has been the
publication of some best-selling books and software on how to prepare tax returns.

The service provided by tradesmen has been widely regarded as expensive and untimely. One result has been the growth of
a large do-it-yourself industry.

D.7.2. Reduction of Time for Service

Some cultures exhibit an urge to "get it over with." In such cultures, those who can serve customers in the shortest time are
rewarded by a higher share of market. A spectacular example of this urge is the growth of the fast-food industry. This same
need for fast food and quick service is an essential element in the urge of a producer to employ "just-in-time" manufacturing
techniques.

D.8. Perfectionism
The human being exhibits an instinctive drive for precision, beauty, and perfection. When unrestrained by economics, this drive
has created the art treasures of the ages.

In the industrial society, there are many situations in which this urge for perfection coincides with human needs. In food and
drug preparation, certain organisms must be completely eliminated, or they will multiply and create health hazards. Nuclear
reactors, underground mines, aircraft, and other structures susceptible to catastrophic destruction of life require a determined
pursuit of perfection to minimize dangers to human safety. So does the mass production of hazardous materials.

However, there are numerous other situations in which the pursuit of perfection is antagonistic to society, since it consumes
materials and energy without adding to fitness for purpose, either technologically or aesthetically. This wasteful activity is
termed "perfectionism" because it adds cost without adding value.

D.9. Acknowledgments

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This chapter has drawn extensively from the following:

De Feo, J. A., and Barnard, W. W. (2004). Juran Institute's Six Sigma Breakthrough and Beyond. McGraw-Hill, New York.

Gryna, F. M., Chua, R. C. H., and De Feo, J. A. (2007). Quality Planning and Analysis, 5th ed. McGraw-Hill, New York.

Juran, J. M. (ed.) (1995). A History of Managing for Quality. Sponsored by Juran Foundation, Inc. Quality Press, Milwaukee,
WI.

Juran, J. M. (2004). Architect of Quality. McGraw-Hill, New York.

Juran, J. M., and Godfrey, A. B. (1999). Juran's Quality Handbook, 5th ed. McGraw-Hill, New York.

The author is grateful to the copyright holders for permission to quote from these works.

D.10. References
Betting to Win on the Baldie Winners. (1993). Business Week, October 18.

Juran, J. M. (1964, 1995). Managerial Breakthrough. McGraw-Hill, New York.

Juran, J. M. (ed.) (1995). A History of Managing for Quality. Quality Press, Milwaukee, WI.

Levine, R. (1987). Breaking Routine: Voice of the Subway. The New York Times, January 15.

Levitt, T. (1960). Marketing Myopia. Harvard Business Review, July–August, pp. 26–28ff.

Ollson, J. R. (1986). The Market-Leader Method; User-Oriented Development. Proceedings 30th EOQC Annual Conference,
pp. 59–68. European Organization for Quality Control.

The Perils of Cutting Quality. (1982). The New York Times, August 22.

Watson, G. H. (2016). Understanding the Role of Quality. Presentation atCroation Society for Quality. Porec, Croatia. May 20.

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