The End of Quality – Part 2

There is a joke about two guys hiking in the woods when they suddenly see a bear looking at them. The first one says, “What shall we do?” The second guy says, “Run.” The first guy says ‘…but you can’t outrun a bear.” The second guys says, “I don’t need to outrun the bear, I just need to outrun you!” So it is with ‘quality’.

Whilst Kaizen, the Japanese term for continual improvement is a neceesary part of building a great company, the quest for ‘zero faults’ may well be illusory and unnecessarily expensive. You have to be better than your competitors, not perfect. Even my Japanese karate instructor, the late great Sensei Enoeda, used to say ‘Make your worst technique your best technique.’ What he meant by that was, beyond a certain level of skill you should focus your training on improving your areas of weakness and vulnerability rather than trying to hone your best technique to perfection. It sounds very pragmatic by Japanese standards.

Let’s put this into a business context. On the one hand, you need to understand exactly what few attributes you really compete on. For example, historically Ryanair competed on price and probably punctuality. They had to be well ahead of the competition on these but just competent on everything else. Sometimes they didn’t even manage that but still their planes were full! Their market were passengers who didn’t care about meals, politeness or many other things. Their target market were passengers driven price, a market that turned out to be much bigger than the traditional airlines had anticipated!

On the other hand, safety is an example of something where a minimum standard is required to be ‘in the airline game at all’. Consequently, it is not really a point of competition in highly regulated markets. Too many crashes and you are out of business, no matter what your price.

In my distribution business, we competed on product range and availability and easy of doing business. We chose not to compete on price (within a certain range) because we needed to fund a diverse inventory and a lot of human contact, both of which can undermine economies of scale. We often found that customers would ask us to match a competitors price, which we rarely did because that competitor did not have stock. We could charge a premium for reliability and instant availability and we needed the extra margin to ensure those competitive advantages.

At one time, we considered enhancing our service to our independent retail customers by giving them ‘guaranteed before 12pm’ deliveries. We tested the market to see if they valued it by seeing if they would pay extra themselves for it. Almost none of them did. It wasn’t something they valued enough, especially as most of the time courier firms delivered before 12pm anyway.

The point is we could have swallowed the extra costs ourselves and offered something the competition didn’t but in the end it wasn’t something that would give us a meaningful competitive advantage. In my role as a consultant, I see companies eating the cost of adding extra ‘bells and whistles’ to thei services they offer all the time. However, they never really checked if it gave them a competitive advantage. To be successful in business, you have to be pretty ‘hard-nosed’ about adding extra costs.

In summary, you need to be very clear about what your key success factors are with regard to your market and competition. These are the areas you should be constantly developing and where you should be focusing your energies. In other areas you have to be good enough not to be vulnerable to competitors, as  Sensei Enoeda advised, but not perfect. IN SMEs, management time is very limited and you need to concetrate on those things your customers really care about.

If you agree that a fresh set of eyes is often helpful and would like help in defining or reviewing your competitive strategy, contact me, Mike Trup at Adman Management Partners for a no obligation chat.

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