STRATEGIC PLANNING FOR QUALITY AND ADVANCED QUALITY MANAGEMENT TOOLS

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TotalQuality Management MGT510

Lesson # 33

STRATEGICPLANNING FOR QUALITY AND ADVANCED QUALITYMANAGEMENT

TOOLS

A firm has many options in defining its long-terms goals and objectives, the customers it wants to serve,

the products and services it produces and delivers, and the design of the production and service system

to meet these objectives. Strategic planning is the process by which the members of an organization

envisionits future and develop the necessary procedures and operations to carry out that vision.Strategy

the result of strategic planning is the patter of decisions that determines and reveals a company's

goals, polices, and plans to meet the needs of its stakeholders. An effective strategy allows a business to

create a sustainable competitive advantage.

Totalquality relates to strategic management in that it enhances an organization'sability to gain a

sustainable competitive advantage in the marketplace. Handledproperly. Total quality can be the most

effectivecost leadership and/or differentiation strategy an organization can adopt.This is because the

totalquality approach is the best way to continually improve efficiency and cut costs throughout an

organization'sactivity-cost chain, whilesimultaneously continually improving the features of the

product or service that differentiates it in the marketplace. Total quality can alsoimprove an

organization'schances of becoming a leader in a givenmarket niche.

What is Strategic Management?

To understand strategic management, one mustfirst understand the concept of organizational strategy.

Strategiesare defined as follows:

Organizationalstrategies are the approaches adopted by organizations to ensuresuccessful

performance in the marketplace. These approaches aretypically set forth in a comprehensive

document called the strategic plan.

Strategic management is management thatbases all actions, activities, and decisions on what is most

likely-within an ethical framework to ensuresuccessful performance in the marketplace. From the

strategic manager's perspective. Resources arewasted unless theycontribute to success in the

marketplace, and the more direct the contribution, the better.

Quality as a Strategy

Theconcept of strategy has differentmeanings to different people.James Brian Quinncharacterizes

strategy as follows:

A strategy is a pattern or plan that integrates an organization's major goals, policies,

and action sequences into a cohesive whole. A well formulated strategy helps to

marshaland allocate an organization'sresources into a unique and viable posture based

on its relative internalcompetencies and shortcomings, anticipatedchanges in the

environment, and contingent moves by intelligent opponents.

Formalstrategies contain three elements:

Goals to be achieved,

Policiesthat guide or limit action, and

Actionsequences, or programs, that accomplish the goals.

Thetraditional focus of business strategieshas been on finance and marketing. Theseparallel

two of the principal sources of competitive advantage based on cost and differentiation. Total

quality with a focus on people leads to improvements in both areas.Therefore, qualitycan

be viewed as a strategy in itself.

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Therole of quality in business strategy has taken two significantsteps since 1980. First,many firms

have recognized that a strategy driven by quality can lead to significant market advantages.Second, the

lines between quality strategy and generic business strategies have becomeblurred to the point where

TQ principles are integratedinto most businesses' normalbusiness planning; that is, TQ is a basic

operatingphilosophy that provides the foundation for effectivemanagement.

Formost companies, integration of TQ into strategic business planning is the result of a natural

evolution.For most new companies or those that have enjoyed a reasonable measure of success

qualitytakes a back seat to increasing sales,expanding capacity, or boostingproduction. Strategic

planningusually focuses on financial and marketing strategies.

Components of Strategic Management

Strategic management consists of twointerrelated activities: (a) strategic planning and (b) strategic

execution.These two primary components of strategic management are described in the following

sections.

Strategic Planning

Strategic planning is the process by which an organization answers such questions as the following:

Whoare we? Where are we going?How will we get there? What do we hope to accomplish? What are

ourstrengths and weaknesses? Whatare the opportunities and threats in our businessenvironment?

Strategic planning involves developing a written plan following components: an organizational vision:

an organizational mission; guidingprinciples; broad strategic objectives;and specific tactics, projects,

or activities for achieving the broad objectives. Specific tactics, projects, and activities are oftenreferred

to as the "action plan."

Strategic Execution

Strategic execution involves implementingstrategies set forth in strategic planning. Monitoringprogress

towardtheir achievement, and adjusting as necessary. Strategic execution is implementation that

achievesmaximum efficiency and effectiveness.

Monitoringinvolves constantly checking actual performance against performance benchmarks. Strategic

monitoringanswers such questions as these:Are we achieving ourobjectives? This is the effectiveness

question.Are we performing as well as we need to perform? This is the efficiency question.Adjusting

as necessary involves making corrections when the specific strategies or tactics adopted arenot

producing the desired results. Such adjustmentscan involve a minor tweaking of plans finding ways to

overcome unexpected barriers that are encountered or even adopting a whole new set of specific

strategies.

StrategicPlanning Overview

Strategic planning, as described previously is the process whereby organizationsdevelop a vision, a

mission, guiding principles, broadobjectives, and specific strategiesfor achieving the broadobjectives.

Before even beginning the planning process, an organization should conduct a SWOT analysis. SWOT

is the acronym for strengths,weaknesses, opportunities, and threats. A SWOT analysis answersthe

following questions: What are thisorganization's strengths? Whatare this organization'sweaknesses?

Whatopportunities exist in thisorganization's business environment?What threats exist in this

organization'sbusiness environment?

Thesteps in the strategic planning process(Following Figure) should be completed in order, because

eachsuccessive step grows out of the preceding one. The SWOT analysis provides a body of knowledge

that is needed to undertake strategic planning. The mission grows out of and supports the vision.The

guidingprinciples, which represent the organization's value system,guide the organization's behavior as

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it pursues its mission. Thebroad objectives grow out of the mission and translate it intomeasurable

terms;Specific strategies tiedirectly to the broad objectives.Typically there will be two to five

strategiesfor; each objective butthis is a general guideline, not a hard and fast rule.

StrategicPlanning Process

SWOT Analysis

Step 1

(Environmental Assessment)

Developthe Vision

Step 2

Developthe Mission

Step 3

Developthe

Step 4

Guiding Principles

Developthe

Step 5

BroadStrategic Objectives

Developthe

Step 6

ActionPlans

Strategic Planning and the Baldrige Award

TheBaldrige Award recognizes the importance of integrating totalquality principles withoverall

businessplanning. The Strategic Planningcategory addresses strategic businessplanning and

deployment of plans. It stresses thatcustomer-driven quality and operational performance are key

strategic business issues that need to be an integral part of overall company planning, and emphasizes

thatimprovement and learning must be integral parts of company workprocesses. The special role of

strategic planning is to align workprocesses with the company strategic directions, therebyensuring

thatimprovement and learning reinforce company priorities.

The Strategic Planning category examines howorganizations;

Planfor the long term, and understand the keyinfluences, risks, challenges, and other

requirements that might affect the organization's future opportunities and directions. This is to

helpensure that short-term action plans are aligned with the organization's longer-term strategic

directions.

Project the future competitive environment to help detect and reducecompetitive threats,

shorten reaction time, and identifyopportunities.

Developaction plans and deploy resources particularly human resources to achieve

alignment and consistency, and provide a basis forsetting and communicatingpriorities for

ongoingimprovement activities.

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Ensurethat deployment will be effective that a measurementsystem enables tracking of action

plan achievement in all areas.

Theintegration of quality planningwith business planning occurred in the 1995 criteria revision.Most

symbolicwas the change in the category'stitle from "StrategicQuality Planning" to "Strategic

Planning."This change signaled a "major emphasis on business strategy as the most appropriateview-

of-the-futurecontext for managingperformance." The integration of quality and operational issueswith

businessplanning became a dominanttheme, with a focus on "performance,""Competitive position,"

"customer-related," and "operational" themes.

Conducting the SWOT Analysis

Therationale for conducting a SWOT analysis before proceedingwith the development of the strategic

plan is that the organization's planshould produce a good fit between its internal situation and it external

situation. An organization's internal situation is defined by its strengths and weaknesses. An

organization'sexternal situation is defined by the opportunities and threats thatexist in its business

environment.The strategic plan should, be designed in such away that it exploits an organization's

strengths and opportunities, while simultaneouslyovercoming, accommodating, or circumventing

weaknesses and threats.

IdentifyingOrganizational Strengths

An organizational strength is any characteristic or capability that gives the organization

a competitive advantage. The followingare examples of common organizational strengths:

Financial strength

A good reputation in the marketplace

Strategic focus

High-quality products/services

Proprietaryproducts/services

Cost leadership

Strongmanagement team

Efficienttechnological processes

Talentedworkforce

Fastertime to market

Theseare just some of the strengths an individual organizationmay have: many othersare possible. The

key is accurately defining an organization'sstrengths before beginning to develop its strategic plan.

IdentifyingOrganizational Weaknesses

An organizational weakness is any characteristic or capability that is lacking to the extent that it puts the

organization at a competitive disadvantage. These areexamples of common organizationalweaknesses:

Strategic confusion/lack of direction

Obsolete facilities

Obsolete processes

Weakmanagement team

Insufficientskills/capabilities in the workforce

Poorlydefined operatingprocedures

Toonarrow a product line

Productswith decreasingdemand

Toodiverse a productline

Poor image in the marketplace

Weakdistribution system

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Weakfinancial position

Highunit costs compared withthose of competitors

Poor quality in products/services

Theseare just a few of manyweaknesses an organization may have. The main thing is to identify an

organization'sweaknesses accurately before undertaking the strategic planning process.

IdentifyingExternal Opportunities

Externalopportunities are opportunities in the organization's business environmentthat represent

potentialavenues for growth and/orgaining a sustainable competitive advantage. The following are

examples of external opportunities thatorganizations mayhave:

Availability of new customers

An expanding market for.existing or potential/planned products

Ability to diversify into related products/services

Removal of barriers that inhibitgrowth

Failures of competitors

Newon-line technologies thatenhance productivity or quality

Of course, other externalopportunities might be available to an organization besides these. You need to

identifyall such opportunities accurately before undertaking the strategic planningprocess.

IdentifyingExternal Threats

An external threat is a phenomenon in an organization's business environmentthat has the potential to

put the organization at a competitive disadvantage. Such external threats mightinclude the following:

Entry of lower cost competitors

Entry of higher quality competitors

Increasedsales of substitute products/services

Significantslowdown in marketgrowth

Introduction of costly new regulatory requirements

Poor supplier relations

Changingtastes and habits of consumers

Potentiallydamaging demographicchanges

Manyother external threats mightconfront an organization. Accuratelyidentifying everypotential

externalthreat before you begin the strategic planning process is a must.

Developingthe Vision

An organization's guiding force, the dream of what it wants to become, and its reason forbeing should

be apparent in its vision. A vision is like a beacon in the distancetoward which the organization is

alwaysmoving. Everything about the organization-its structure, policies,procedures, and allocation of

resources-should support the realization of the vision. In an organization with a clear vision, it is

relativelyeasy to stay appropriately focused. If a policy does not support the vision, why have it? If a

procedure does not support the vision,why adopt it? If an expenditure does not support the vision. Why

make it? If a position or even a department doesn't support the vision, why keep it? An organization's

visionmust be established and articulated by executive management and understood by all employees.

Thefirst step in articulating an organizational vision is writing it down. This is called the vision

statement.

Developingthe Mission

We have just seen that the vision statement describeswhat an organization wouldlike to be. It's a

dream,but it's not "pie in the sky". The vision represents a dream that can cometrue. The mission takes

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the next step and describes who the organization is, what it does. and where it is going. In developing

the mission statement for anyorganization, one shouldapply the following rules of thumb:

Describe what, and where of the organization,making sure the component describesthe

organization and its customers.

Be brief, but comprehensive. Typically one paragraph should be sufficient to describe an

organization's mission.

Choosewording that is simple, easy to understand, and descriptive.

Avoidhow statements. How the mission will be accomplished is described in the

"Strategies" section of the strategic plan.

Developingthe Guiding Principles

An organization's guiding principles establish the framework within which it will pursue its mission.

Eachguiding principle encompasses an important organizational value.Together, all of the guiding

principlesrepresent the organization's valuesystem--the foundation of its corporate culture.

DevelopingBroad Strategic Objectives

Broad strategic objectives translate an organization's mission into measurable terms.They represent

actual targets the organization aims at and will expend energy and resources trying to achieve. Broad

objectivesare more specific than the mission, but they are stillbroad. They still fallinto the realm of

what rather than how. The howaspects of strategic planning come in the next step: developingspecific

tactics, projects, and activities foraccomplishing broadobjectives.

DevelopingSpecific Tactics (ActionPlan)

Theaction plan consists of specific tactics that arewell-defined, finite projects and activities undertaken

for the purpose of achieving a specific desired outcome. They are undertakenfor the purpose of

accomplishing an organization's broad strategic objectives. Tactics have the following characteristics.

Theyare SMART:

Arespecific in nature

Aremeasurable

Can be quantifiable

Can be accomplished within a specified timeframe

Can be assigned to a specific individual or group

Aretied directly to a broadobjective

RevolutionaryThinking in Strategic Planning

Writingfor the Harvard BusinessReview, Gary Hamel makes a case for revolutionarythinking as a

businessstrategy; He describes three types of companies that can be found in any industry:

Rule makers- Theseare the companies thatbuilt the industry in question. IBM, Sears, and

Coca-Cola are examples of rulemakers.

Rule takers- Theseare the companies thatfollow the rules made by the industryleaders. J.

C. Penney, Fujitsu, and U.S. Air exemplify rule takers.

Rule breakers- Theseare the maverick companiesthat break the rules, ignore precedent,

andcast aside convention. IKEA,Charles Schwab, and Southwest Airlines are rule

breakers.

Beforebeginning strategic planning, executives must decide which of these three types of companies

theywant. Rule makers adopt one type of vision, rule takersadopt another. and rulebreakers, yet

another.Rule makers will adopt a vision in which theydominate and set the rules in a givenmarket.

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Ruletakers will adapt a vision in which they are industryleaders but perennially lessthan first-place

finishers;their strategies will focus on continuous incremental improvement to work their wayever

closer to the market leader. Rulebreakers will adopt a visionthat focuses on carving out a market niche

thatbecause of its characteristicsmay not be well served by the market leaders. Suchcompanies will

thenseek to dominate their nichemarket.

TheStrategic Management ProcessRe-Cap:

Strategic planning helps leadership mold an organization's future and managechange by focusing on an

idealvision of what the organizationshould and could be 10 to 20 years in the future. In contrast, the

term "long range planning" maymean only one year in the future or the next budget submission in

manyorganizations. Strategic plans aredeveloped at the highest level of an organization and deployed

throughout.

The strategic management process consists of two parts: formulation and implementation. Strategy

formulationconsists of defining the mission of the organization the concept of the business and the

vision of where it is headed; setting objectives translating the mission intospecific performance

objectives; and defining a strategy determiningspecific actions to achieve the performance objectives.

Planning is good but implementation is difficult and requires various tools and skillets. Implementation

focuses on executing the strategy effectively and efficiently, as well as on evaluating performance and

makingcorrective adjustments whennecessary.

Advanced Quality ManagementTools:

To create added value for the customer and for Prevention rather than Correction, Japanesedeveloped

the new tool set designed to address strategic issues in quality.These management planningtools are

known as Advanced Quality Tools and are as follows:

MatrixDiagram

RelationsDiagram

AffinityDiagram

Systematic or Tree Diagram

Matrixdata Analysis

Arrow Diagrams

ProcessDecision Program Chart

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