An interview with Armand Feigenbaum
Interview by: Sarah Powell
Dr Armand V. Feigenbaum is President and Chief Executive of General Systems Company, a leading corporation, founded in 1968, which designs and implements management operating systems in major manufacturing and services companies throughout the world.
Armand Feigenbaum was co-founder of the company with his brother, Donald S. Feigenbaum. Prior to this, he was Manager of Worldwide Manufacturing Operations and Quality Control for General Electric Company. Dr Feigenbaum is the originator of total quality control, an approach to quality and profitability that has profoundly influenced management strategy in the competition for world markets. His book Total Quality Control has been published in over 20 languages and is widely used throughout the world as a foundation for quality control practice. Amongst other nominations and awards, Dr Feigenbaum has been named an Honorary Member of the American Society for Quality Control, that body's highest honour. He has been named a member of the National Academy of Engineering of the United States.
How has your concept of total quality control developed since it was introduced in the 1950s?
A good question. As you know, when I originated total quality control, and later total quality management, the fundamental theme was that improvements in quality lead to improvements in everything else in the organization; hence quality is a way of managing.
What we're doing with total quality control in the General Systems Company at present, and the focus of the upcoming new edition of my total quality book, is what we call Total Quality 2000. The basic message of this is that quality today has become a central plank of business success, because a company's income comes not from Wall Street but from its customers, from satisfying its customers.
Quality is neither a department, nor a technique nor a philosophy. It is a fundamental way of managing. Central to this is the recognition that, without quality, your customers, whether industrial or consumer, are simply not going to buy from you. Acceptance of this by business depends on the company and its leadership - and on the business cycle. If you look at companies such as General Electric, Wal-Mart or Union Pacific, you will see that quality has been an indelible characteristic of their leadership from the beginning. Some other firms, however, have demonstrated a dangerous tendency to confuse a strong economy with good quality, which is quite different. Such confusion is one of the factors contributing to a remarkably rapid sales downturn suffered by some companies. These companies have quite simply failed to understand the quality argument.
When times are hard, it is easy to emphasize the importance of a total customer focus because 'the barbarian is at the gates', sales are slack and so on. But in good times some businesses can just as easily lose their customer focus. Here we can differentiate between leading companies which demonstrate consistent quality and those with a less consistent record. Leading companies have recognized that, unless they focus on the customer in both good times and bad, they will be unable to increase their profitability.
You were the originator of quality cost management, emphasizing the cost of quality, and categorizing quality costs, i.e. the cost of achieving quality plus the cost of absence of quality. But the cost emphasis is said to have fallen out of fashion in recent years. Is this so and, if so, why?
This again is related to the answer to the first question. In good times, in some companies, as long as profits remain high, detailed cost management tends to be relegated to the book-keepers for whom quality cost may not be a major interest because it may not be thought of as an accounting standard. The stance adopted by some managers is: 'let's get on with growth'. Only when there is a business downturn do some managements take strong interest in quality cost.
The best companies, meanwhile, behave quite differently. For instance, leading companies such as Tenneco, one of America's biggest conglomerates which has spun off its many properties into separate companies, directly manage and measure the cost of quality. In a recent book about his company's success and its co-operation with General Systems, the CEO of Tenneco made the point that well over $2 billion in cost improvement were generated by his corporations quality cost focus and well over $3 billion were generated in terms of increased revenue as a result of rigorous emphasis on this.
This is not confined to manufacturing or services. In an entirely different industry, we have been co-operating with what is America's largest railroad - Union Pacific. This company has made quality cost measurement a central indicator of performance every quarter. Quality cost performance is one of its key reporting areas.
You have warned against what you call 'backward creep' in quality performance, emphasizing that quality must be measured against the customer's requirements, whether stated or unstated, conscious or merely sensed, technically operational or entirely subjective; and as such always representing a moving target in a competitive market. How can a supplier gauge a customer's unstated, subjective requirements?
Today's buyer makes his or her decision based not so much on whether or not a product is likely to work - most products work - but on the way it is presented, its characteristics, the service network and so on. In General Systems, our starting point is that you must seek the consumers business by gauging how you can make him or her more satisfied and more secure. Much of that is subjective. When wooing an industrial buyer, we ask the same sort of fundamental question: 'what must we do to make him or her more competitive'?
The strength of customer-orientated information technology has become important. But, while new technology undoubtedly has a role to play, personal interaction remains important. One of the questions I always ask executives of the companies we serve is: 'How many customers have you actually gone out to spend time with in the last quarter?' It's frightening, in some areas, how few customers have been directly visited and talked with.
"Quality is neither a department, nor a technique nor a philosophy. It is a fundamental way of managing. Central to this is the recognition that, without quality, your customers, whether industrial or consumer, are simply not going to buy from you."
In a recent article on e-business, you make the point that, while first movers apparently gain a decisive long-term advantage, they also run the risk of incurring customer dissatisfaction if speed of introduction means online management is poor. To combat this, you stress the need to ensure strategy is both customer- and supplier-focused. Given the research involved, might this not slow down the process, with the consequent risk of loss of first mover position?
Actually the reverse is true with properly focused strategy. Don Feigenbaum, who is Executive Vice-President at General Systems, divides every product area into four cycles of maturity, i.e. innovation, what we call conspicuous consumption, function and, finally, commodity. If you look at this in terms of PCs, for example, at the moment they're moving toward the commodity stage. In the early days when computers were an innovation area, the objective wasn't necessarily to provide a computer that worked perfectly. Quality in the latter day market sense of overall commodity performance wasn't an issue. Quality in the sense of innovation was. From that leadership position, and the unique customer recognition and information it provides, you then provide leadership throughout the other stages if you are properly focused and aggressive.
Look, for example, at the fast moving e-business. E-bay is a company that has continued to perform strongly, maintaining its lead on Yahoo because it constantly moves forward in this maturity cycle. You can't stand still. The same is true of quality - it is not a fixed point and speed of action is its distinguishing characteristic.
Is there not an argument for imitation rather than innovation in e-business, thereby letting the innovators smooth the path and bear the costs and risks?
Certainly. There is no question that what might be called 'imitators' - although I wouldn't use that word - have taken a very significant part of their market lead from the original innovators. But the issue is that this is not imitation in the literal sense of the word. Fundamentally, what it is is picking up on the market growth maturity cycle and running to its leadership. Look at the companies that invented the computer industry. Too few of them are around any more. But simple imitation cannot be blamed for this. Take Wang Laboratories, for example. That company invented much of the industry but its founder, unfortunately, insisted that the big application for computers was as typewriters. His imitators, of course, developed well beyond that. But this wasn't imitation. It was following the trail in the direction that the much broader product maturity cycle was leading.
You have noted that the ease of communication of the Internet makes it ever more important to satisfy consumers because of their ability to voice any discontent online. To what extent is the Internet as a tool of communication exerting pressure on manufacturers of all kinds to offer quality goods?
It's an enormous influence. If, as we do, you look at the attrition rate among e-companies, which is also, unfortunately, enormous, you tend to find that there is a distinguishing characteristic when comparing them with companies such as Amazon or Yahoo.
Amazon, for just one example, has, right from the very beginning, placed strong emphasis on quality of delivery. That company introduced the practice of patenting its business processes, it developed warehouses, pioneered reliable quick delivery and so on, to enable it to manage the quality of its goods.
An unfortunate contrast is the experience of other dot-com companies killed by failure to deliver on time. The companies learned the hard way that quality is quality whether the business is a dot.com enterprise or bricks and mortar firm. Price is a factor but service and other issues are enormously important.
You have stressed the importance of quality leadership and the need for continuous quality improvement in order to meet changing customer expectations. How does an organization avoid demotivating the workforce when the 'target' is continually moving?
In fact the workforce is often more aware than management of the importance of quality and the need for continuous improvement, because it can sometimes be more involved in the day-to-day issues and responses. There is evident employee pride in companies such as IBM or GE or, I like to think, our own General Systems; this is a function of the insistence that employees be customer-oriented, always. Going back to a point I made earlier, it is important, periodically, to go and talk to customers, so as to ascertain their requirements.
You have noted the positive impact of quality on economic growth in the USA in the 1990s and have suggested that this will continue into the new millennium. However, might not the pressures of globalization, increasing competition, and the consequent need for continuous, rapid change and innovation tempt businesses to cut corners, i.e. might the current operating environment deter quality initiatives?
Actually, the reverse is true in terms of pressure. I'll cite a couple of examples. First there was the difficulty of Firestone's tyre recall last year. This illustrates that even a brand name that has glittered for almost a century can be frighteningly quickly challenged. Another example is that of the market share challenge facing the U.S. automobile industry. At the moment there is a possibility of a market share reduction of as much as 8 per cent for American producers in the United States as compared with Asian and, to some considerable extent, European producers. That is an enormous figure and the American companies will undoubtedly respond to it with strong results.
Quality is universal. It is not only the Internet but globalization that has made product quality transparent to a degree that has meant that the notion of a localized product being able to survive for any period of time is increasingly unlikely unless it meets global leadership demands.
What are the main messages of your forthcoming book: The Power of Management Capital?
A central message is that the growth differentiator in major companies as well as smaller companies today isn't only technology or technological innovation - although that has been widely promoted. It is management innovation. Management innovation makes technological innovation possible and profitable. However, we are talking about a different kind of management innovation. It is not incremental, industrial engineering-style management innovation. In computers, for example, one of the important innovations resulted from Michael Dell's invention of the notion of getting the customer to go directly to him.
Another example is how total quality management continues to change the world. There is no question about that at all. Doctor Toyoda long ago made the point to me that lean manufacturing, which his company invented, was an enormous competitive strength for an automobile company in Japan, half a world away from the global market. That too was management innovation.
In my book I talk about how we introduce management innovation at General Systems, what the differentiator is and why technological innovation, while important, is a factor. I also discuss how e-technology is really what in General Systems we call a 'multi-purpose technology'. What I mean is that it involves not only the launch of new products, but an entirely new way to manage. Take Wal-Mart, for example. As soon as a product barcode is read at checkout, not only is the purchase listed on the customer's receipt, but direct links with banks mean the supplier can be paid immediately. This prompt payment means Wal-Mart can negotiate volume discounts from its suppliers which, in turn, can translate into lower prices for customers. That is management innovation for you.
What do you see as the main quality challenges for management in the immediate future?
A major challenge is the recognition that businesses must manage in terms of their customers and that the leadership function is to constantly increase product and service value for these customers. To do that, leadership must create this overarching theme of what I call 'management capital' and the total quality management that supports it. This leadership job is quite different from that in the past. It brings together the old economy strength of financial responsibility and physical asset emphasis with new economy opportunistic growth focus and intellectual soft asset strength. Its defining characteristic is the powerhouse value of the speed of successful results.
Very clearly we are now in one of these watershed periods of the world economy which provide the opportunity for companies and managements which really understand the need for quality as discussed above to leap forward. It is with such leading companies that we in General Systems are working on a global basis. They are our growth market.
Interview republished from Emerald Now, March 2001.