The End of Quality – Part 1

For many years it was assumed that ‘quality’ (whatever that meant) was a potential source of competitive advantage. Whilst goals such as zero-defects and ease of use are still necessary goals, I believe that much of business has in fact been commoditised to such a degree that all quality does is get you ‘in the game’.

A prime example of this are so-called reverse auctions held by major companies for supply contracts. I believe General Electric of the US pioneered this appraoch, which is now used by a number of large companies, including the major supermarkets. Their ‘own label’ brands have a set of specification guidelines for supply contracts and selected parties who are known to have the ability to meet those guidelines are invited to the participate in the reverse auction to see who can supply to specification at the lowest price. In this sense, all quality does is get you an invitation to the party but doesn’t guarantee you a dance.

Whilst many companies don’t have the scale or the inclination to run formal reverse auctions more and more are only interested in two things. Can you meet their specifications of supply and if so, what is your price? In setting their own specifications, they are often uninterested in anything else you bring to the party, Value supplied is only value if the other side is willing to pay for it and they have set the rules of decision-making in advance. You might save the purchasing manager you deal with lots of work, but his superiors don’t care and at the end of the day his bonus is determined by the metrics he has to meet.

Aside from quality as a topic in its own right, this approach undermines things such as win-win negotiation (nowadays, they win and you have to decide if you can live with it), relationship selling (How do you have a relationship with a set of metrics?) and countless other business buzzwords.  Of course, there are countless areas of business where it is hard to reduce components to metrics but globalisation and the internet is acting as a cheap enabler of this and the trend is definitely not your friend, unless you are a low cost provider or are in an area where you have real barriers to entry. Even as consumers we choose between 5 star rated suppliers and ignore lower ones on eBay or Amazon. Once they are 5-star rated we choose on price.

These days, without quality you never make it to the ball in the first place. Lots of companies waste a lot of time and money ‘adding value’ that will never be taken into account in the decision-making by their customers. It’s time both sides were actually crystal clear about that.

 

 

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  • James Coakes

    This absolutely cuts to the chase of a significant proportion of corporate buying decisions. If they aren’t running physical reverse auctions many have a buying mentality that amounts to the same thing. 1. Find suppliers who qualify and 2. Find the cheapest of these. I don’t think they’ve not been clear about this, but many smaller suppliers want to think of themselves as offering an artisan service and spend a lot of time and energy communicating things that don’t actually matter.

    • Yup..win-win is more like’better in my pocket than in yours.’