The Seapine View

In Search of Failure.  That’s the title of chapter seven in Frederick Reichheld’s book “The Loyalty Effect” (©1996).  In that chapter Reichheld points out that an investor who built a stock portfolio out of the companies profiled in the book “In Search of Excellence” (Peters and Waterman ©1982) would have seen their returns trounced by the mediocre performance of the S&P index during the ten year period following the books 1982 publication.  In fact, by time Reichheld’s book came out in 1996 only one-fifth of the original companies profiled as “excellent” had remained excellent.

If success breeds success, how in the “quest for benchmarking best practices” did those companies lose their lofty status?  In Reichheld’s opinion what really helps us to achieve excellence is actually the study of failure.  It’s not exactly in our nature to seek out failure though; in fact, your career is probably linked to success, which means that getting too close to failure may feel threatening.  However, most people will admit that mistakes are often better teachers than success.  In fact, QA experts will attest that when one component fails, it can cast a spotlight on the workings of an entire program.

The analysis of failure is not that easy; but when the analysis leads to sustained quality the pay-off is big.  In the Profit Impact of Marketing Strategy (PIMS) project the researchers (Buzzell and Gale, 1987) reported that the profitability of a business is affected by 37 basic factors. Based on analysis of information available in the PIMS database, Buzzell and Gale hypothesized that in the long run, the most important single factor affecting a business unit’s performance is the quality of its products and services relative to those of competitors.

The trick is to set up a process and system to track, test, analyze, and address potential issues, defects or problems before they negatively impact profitability.  In many ways quality and value are interlocked.  Customer value proposition models are based on the idea that customers with different needs require different experiences and different value propositions if the relationship between the customer and company is to be mutually beneficial.  And no value proposition will succeed in delivering profit to a company unless the customer perceives the product (or service) as meeting their needs best.

While passing my bookcase last night I felt compelled to pull out Peters and Waterman’s 1982 classic “In Search of Excellence.”  I found what I was looking for … in chapter six (“Close to the Customer”) I came across this golden nugget; “Service, quality, and reliability are strategies aimed at loyalty and long-term revenue stream growth.
Developing a Quality Obsession …

For purposes of this short conversation I’d like to focus on quality and reliability from a marketing perspective.  A recent article in Marketing News stated that “this year of recalls and disasters related to products made overseas have left American consumers feeling deceived and vulnerable … Consumers are yearning now for reliable, high-quality goods.”  Now, I’ve taken some liberty with the quote from the article above because the main focus was on the “Buy American … Made in the USA” theme.  However; one might get the feeling that suddenly quality and reliability are back in fashion.

Did quality and reliability ever really go out of fashion with customers?  I doubt it.  Which begs the next question: How do you define a quality-ready organization?  For me, a quality-ready organization is focused on quality assurance.  The American Society of Quality (ASQ) defines quality assurance as:

Software has become mission critical for most companies, as glitches with application software can cause serious business consequences.  When I talk to software development organizations they are quick to point out that software is increasingly determining the nature of the customer experience which means that software quality and reliability have become the new lifelines to customer loyalty and profitability.  For them quality-ready software development means being able to profitably design, develop, test and deliver quality software applications on time and within budget.

When I polled my marketing students for feedback concerning quality and reliability one response stood out:  “Quality and reliability are expected, and were your tickets to the dance in the first place.  If quality and reliability fail your chances of dancing with me again are slim.”

Are you building a Quality-Ready organization?  If not, your chance of dancing with the stars (loyal customers) is at risk.