One Thing We Can All Learn from the Auto Industry

By Chris Moustakas, DevonWay Inc.

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We all have things that make our jobs challenging, at least some of the time. Personally, I feel like the industry I chose, enterprise software, is pretty hard, but it doesn’t hold a candle to how brutally hard the automotive industry is.

Consider:

They deal with a global, complex supply chain in which any interruption, whether political, natural, or self-inflicted, can have rippling effects with disastrous results. The number of pieces that go into a modern vehicle, and the degree to which their production has to be planned and coordinated, is nothing short of outstanding.

They are heavily regulated because when they mess up, people can die. All the airbags in the world won’t help a company that introduces a software flaw that, say, punches the accelerator when you turn on the wipers (make no mistake, that gas pedal is not connected to anything more than a digital sensor that can get its signals crossed just like anything else).

The product they build is an engineering marvel and therefore at least as complicated as it is impressive. But there’s no technological moat commanding fat margins – due to intense competition from all sides, they pour billions into capital projects and R&D, not to widen their lead, but to survive.

And they’re expected to innovate every year, like clockwork. If Fall comes around and they’re not introducing a new model, something is wrong. That pace of incremental evolution would be brutal enough, but on top of it they’re also dealing with potentially existential threats that could turn their whole business inside out – self-driving cars, electric vehicles, share vs. buy business models… Japan’s now even trying to introduce IRL flying cars!

(As an aside, if the pace of innovation for cars seems natural, compare a car now vs. one in the 90s to an airplane now vs. one in the 90s. Not only does the plane look and feel the same – it probably is the same plane.)

When we look at all these challenges, what is one clear and pervasive lesson we can draw from the auto industry? That in spite of all these obstacles, or probably because of them, they’re still able to maintain an insane focus on quality.

My wife and I bought a new car about a year and a half ago, our first in almost twenty years. Six months into our ownership we realized we were probably overdue for an oil change. We called the dealer to ask if we should bring it in and they practically laughed at us – it turns out that new cars’ engines are such tightly closed-loop systems that they only need their oil changed at most once a year – and you don’t have to remember because the car will let you know on its own.

Pretty much any model you buy that was designed after 2000 will be such a high-quality piece of manufacturing that it’ll last for as long as it takes you to get bored of it.

How do they do it? Although most automotive OEM’s have a lot of built-in inefficiencies, one area in which they excel is through well communicated, industry-wide standards. IATF 16949 (the auto industry’s version of ISO 9001) went into effect this month, September 2018, and it’s a perfect embodiment of that quality-centric spirit.

There’s no magic sauce in the standard – exhibit good leadership, communicate, find and resolve defects, and continually improve. It’s not magic, but it’s exact, explicit, and expected.

Write down what’s important to you and execute on it. Something we could all stand to do more of.

 

Chris Moustakas

President & CEO, DevonWay, Inc.

Establishing a Culture of Excellence: A Conversation With Arun Hariharan

Arun Hariharan is a quality, knowledge management, and performance management practitioner. He has worked with several large companies and is the founder and CEO of The CPi Coach.

 

Written for both quality practitioners and business leaders, his latest book, Continuous Permanent Improvement (Quality Press, 2014), is a strategic distillation of experiences, anecdotes, stories, case studies, and lessons learned from successes and mistakes in nearly three decades of experience.

 

Hariharan has worked with business processes, systematic thinking, customer focus, quality, and performance measurements in a variety of companies and industries as diverse as financial services, telecom, manufacturing, conglomerate, and management consulting.

 

He spoke with ASQ about key lessons in establishing a culture of continuous permanent improvement.

Q. You talk often in your book about the need to establish a culture of excellence at an organization as a way to ensure success. Others would use profitability or market-share as a way to gauge success. How do excellence and profitability work together to define success in an organization?

Arun Hariharan: In a business, clearly, profitability and market-share are key measures of success. A culture of excellence is an important enabler to achieve financial results – in any event – to achieve them in a sustained way. A culture of excellence will ensure that the organization is proactive and does not miss any improvement opportunity. It can be said that financial results are the end and a culture of excellence is an important means of achieving this end – that’s how they work together.

I would like to use the example of Toyota and another automobile manufacturer (that shall remain unnamed out of respect for the dead!). Both started their automobile manufacturing operations around the same time some decades ago. Toyota decided to follow the path of excellence.

The other company, because it enjoyed a monopoly for many years in its market, made good money for several years despite palming off a shoddy quality product. The party lasted as long as customers had no choice. In the 1980s competition set in, but this company still refused to pay attention to quality or excellence. It believed that it would always have a bunch of “loyal” customers despite its poor quality and despite competitors offering better value.

The reality turned out to be very different. From the very first year that competition set in, the company that did not believe in excellence started losing market-share, eventually going bankrupt. An announcement of its shutting down appeared recently. On the other hand, Toyota, a company that believes in a culture of excellence, is a world-leader in profitability and market share.

Q. How big of a role should upper management play in establishing a culture of excellence versus regular employees?

AH: Upper management is the biggest make or break factor in establishing a culture of excellence. More than merely telling people that excellence is important, it is important to demonstrate to employees that upper management means this. The best way to convince employees is for senior people to actually get involved and spend time in excellence.

For example, I know CEOs who have spent time month after month for years in reviewing quality and customer related performance measures – with the same seriousness with which they review revenue and profits. Another important thing that upper management must do is to ensure that employees’ performance appraisals, starting with the CEO, include measures related to excellence – and that people’s bonuses and growth in the company are actually linked to this.

Perhaps the most important element in establishing the culture of excellence is for upper management to create an atmosphere where employees genuinely feel encouraged, not afraid, to make quality problems, defects and customer-complaints visible, so that they can be solved and prevented.

Q. Is there one particular tool or tools that you recommend are used every day in an organization that wants to commit to establishing a culture of excellence?

AH: We found that if strategic COPIS, root cause analysis, value stream mapping and simply listening to customers can become the organization’s habits rather than merely seen as tools to be used by a few, they will go a long way in establishing a culture of excellence.

Q. How should leaders capture, retain and apply organizational knowledge gathered in the pursuit of excellence?

AH: I look at customer-voice (which could include complaints or data obtained by surveys) as the most important part of organizational knowledge gathered in the pursuit of excellence. Once this knowledge is captured, some of the methods described in my recent book (such as root cause analysis to get to the root of the problem, identify the solution, and make the solution permanent by embedding it into the process) could be applied.

Another important part of organizational knowledge that we found worth retaining and replicating is completed excellence initiatives, including formal quality improvement projects. For example, an improvement project done in one part of the organization could be easily replicated in other locations if the organization has a structured way of capturing, storing, retrieving and applying relevant organizational knowledge.