The Price of Admission--and No More

The city of Irving, Texas recently invited me to address an audience of politicos, government employees, and citizens about the state of today’s marketplace. The speaker who preceded me was none other than the honorable Henry Cisneros, the former Secretary of Housing and Urban Development. Cisneros made a telling point, that as citizens, we expect that government services “work”. We expect potholes to get filled, parks to be usable, garbage to be collected, fire departments to quickly respond, and so on. If city administrators do all this well, they hear nothing from the citizenry. But if they don’t do these things properly, they hear plenty. Why? Because doing the job with zero defects is now expected. Citizens have raised the bar on the minimal performance of city government.

The same is true in the private sector. It used to be that if a company raised its quality standards, good things like customer loyalty, rising income streams and competitive success would automatically follow. Not true anymore. All practicing managers know quality is vitally important, but they also know (or ought to know) that quality on its own is no predictor of corporate success. Quality is simply the price of admission in today’s marketplace. Customers assume the products you provide them will work, that you’ll meet specs, that you’ll deliver on time, that you’ll be available for some help after sale and so on. If you can’t do that, you’re dead. But if you can do that, you simply get to play in the game with everyone else. Not win, but play.

If you stop with quality, even zero defects quality, you’re surviving at best—certainly not thriving. If you’re not providing breakthrough product features, extraordinary design, exceptional customized service—the kinds of things that make your company unique—then simply having zero defects will keep you mired in mediocrity. In an article I wrote 10 years ago, I quoted an astute consultant whose biting comments on “quality” still ring true today: “Automobile manufacturers strive to improve fuel efficiency. Detergent makers become intent on improving the whitening power of their products. While these certainly are not unwise targets for improvement, they are unlikely to move a second-tier firm into a leadership position.”

And that, by the way, is why the empirical results on the impact of programs like TQM (Total Quality Management) and Six Sigma are so underwhelming. This may come as an unpleasant surprise to ideologues in this area, but the reality is that apart from a few famous success stories like GE under Jack Welch, the data show that fewer than 30% of quality interventions have yielded appreciable (or any) boosts in profitability, customer loyalty, or stock value. Whether you’re talking TQM or Six Sigma, there’s a lot more to competitive success than providing roughly the same level of quality which everybody else is doing. And, by the way, even zero defects is not particularly relevant if you’re making a flawless product that’s becoming a low-margin commodity because it’s available everywhere. Or if you’re making a product that nobody wants any more.

Don’t misunderstand. Quality is absolutely necessary. It’s the price of admission in today’s market arena, and it's essential to pursue. But it’s not sufficient for competitive success. You have to be providing customers with a something that they find “wow!” and “gotta have!” I wish more leaders would concentrate on those latter issues rather than assuming that zero defects, reliability, and internal efficiency on their own will save the day.