EMEN 5040Quality, Strategy and Value CreationAchieving B.docx

EMEN 5040
Quality, Strategy and Value Creation
Achieving Business
Performance Excellence
L E C T U R E 1 : A N I N T R O D U C T I O N TO B U S I
N E S S P E R F O R M A N C E
E XC E L L E N C E
Professor Wendy Bailey, ME
Engineering Management Program
University of Colorado, Boulder
Definition Of and Impetus For The BPE
Model
Business Performance Excellence is achieved when an
organization is generating the maximum level of profitability
possible given the human, financial, capital, and other
resources it possesses.
The BPE Model was created by Dr. Jeffrey
Luftig based on the principles of his
mentor, Dr. W. Edwards Deming.
Model

Business Performance Technology is a collection of
strategies, methods, and tools utilized to achieve both
strategic breakthroughs and tactical improvements in key
financial performance and non-financial indicators (KPIs and
NFIs)
Model
What was the origin of the model?
What was the problem(s) the model was intended to
solve?
Symptoms of Organizational Deficiencies
The organization has a Vision and
Mission which serve mostly as the basis
for supposedly inspirational posters,
slogans, wallet cards, pocket protectors,
and ‘thought of the day’ quizzes
All of which constitute non-value-added expenditures and
activities
DO IT RIGHT
THE FIRST TIME
QUALITY
FIRST

There is little or no integration between:
The organization’s Vision and Mission
The organization’s strategic and business plans
The CPMs (KPIs and NFIs) measured on a daily basis
The organization annually generates 100’s of “number one
priorities” (goals / objectives), while everyone recognizes it
doesn’t actually have the resources to achieve half that
many
Many constructs or themes inherent within the
organization’s vision and mission are never measured
The organization’s strategic and business plans are last
viewed each year by managers when they place the 4” 3
ring binders on their shelves
The divisions or departments within the organization can all
successfully “hit their numbers”, while the organization as a
whole fails to make an acceptable profit
Projects are selected for their interest level and/or cannot

be killed off
Individuals’ responsibilities are often only related to the
vision, mission, and strategic plan of the organization by
happenstance
The organization operates on a “feed the beast” mentality,
assuming that any business is superior to no business (i.e.
revenue is king)
The organization employs standard or average cost
accounting procedures to ensure that no one understands
what business is truly profitable
True versus apparent cost and profit cannot be broken down
by flow path, customer, product(s) or any critical
component; leading to . . .
Incentive systems that encourage the sale/production of
‘any’ units, versus the optimization of ‘richness of product
mix’ sold/produced, leading to . . .
Working on just-in-time process improvement and lean
manufacturing projects which ultimately reduce profit
(asset) dollars generated

Using X% headcount reductions ‘across the board’ (in the
name of fairness) to reduce costs
Using headcount reductions and capital equipment
investments as a first rather than last choice to improve
profitability
Discussion
Making the Transition to Strategic Thinking
and Planning and BPE
The breakthrough in moving from these systemic
deficiencies to BPE was the introduction of the Theory of
Profound Knowledge (posted on the course website),
advanced by Dr. W. Edwards Deming just prior to his death
Why is the Theory of Profound Knowledge critical to
achieving Business Performance Excellence (BPE); or to
going from ‘good to great’? Why is it particularly useful in
the area of strategic & business planning?
What’s the big deal? Why was this the ‘ah ha’ key?
Quotes on

Profound
Knowledge from
Dr. Deming
"Hard work and best efforts, put forth
without guidance of profound
knowledge, may be well at the root of
our ruination. There is no substitute
for knowledge.“
(W. E. Deming, Osaka, Japan, 1989)
"You can learn a lot about ice and
know nothing about water."
Quotes on Profound Knowledge
from Dr. Deming
" . . . What is the result of hard work and best efforts? What
they do is only to dig deeper the pit that we are in. But they
will not dig us out of the pit, only dig it deeper, make it
more difficult to get out of. To get out of the pit we require
an outside view. No chance from the inside. A system
cannot understand itself. Understanding comes from
outside."
Quotes on Profound Knowledge
from Dr. Deming
"An outside view provides a lens for examination of our
present actions, policies. An outside view is . . . profound
knowledge."

Basis for Business Performance Improvement:
Deming’s System of Profound Knowledge
Appreciation for a system
Knowledge about variation
Theory of knowledge
Psychology – of individuals, society and
change
‘Constructing the Ladder' : The 4 Components
of Theory in Profound Knowledge
An Outside View
Knowledge
Cognitive
Psychology
Organizational
Behavior
Statistical &
Scientific
Theory
Systems

Theory
Dr. Deming's Theory of Profound
Knowledge
Profound knowledge is the requisite theory necessary to
enable and facilitate the process of learning and
understanding how to improve the quality of product and
process;
This involves theory answering the questions "How . . .
excerpted and paraphrased from Anderson, Dooley, and
Misterek
Knowledge
Related to Cognitive psychology . . .
a) does the human mind synthesize information into knowledge?
b) does the human mind represent, store, and integrate
knowledge?
c) does the human mind deal with uncertainty?
d) does the human mind reason causally?
Misterek

Knowledge
Related to Statistical and Scientific theory . . .
e) is the scientific method, or PDCA cycle, used to generate
knowledge?
f) are statistical methods used to distinguish common and
special
causes of variability?
g) can quality be defined and measured?
h) is theory developed, tested, and changed?
i) can the relevant scientific theory be applied?
Misterek
Knowledge
Related to Organizational Behavior and theory . . .
j) does the structure of an organization interact with its
performance capability?
k) does individual behavior interact with organizational
behavior?
l) should authority and control be used in the organization?
m) does the system respond when pushed to perform beyond its
capabilities?

n) do the physiological needs of humans interact with the needs
of
the organization?
Misterek
Knowledge
Related to Systems theory . . .
o) should the organization interact with its customers?
p) do the elements of the organization interact, and how do
these
interactions affect performance?
q) do systems interact, and how do these interactions affect the
outside environment?
r) do the aforementioned elements of profound knowledge
interact with each other?
Misterek
Source: BMGI, Breakthrough Management Group International
Systems

Performance Excellence
Outcomes:
Sustained Profitability
Customer and Employee
Satisfaction
Growth and Innovation
Profound knowledge possesses the potential to serve as the
single most valuable element in the strategic / business
planning process by:
◦ Challenging axiomatic beliefs, particularly as related to
Critical
Performance Indicators / Measures (CPMs)
◦ Understanding cultural/organizational paradigms; including
myths
surrounding "best products" and "most valued customers"
◦ Separating variability originating from common versus special
causes; and strategic from tactical objectives, based upon data
Examples of CPM/Paradigm issues where profound
knowledge may create the basis for breakthrough

improvements (i.e. 'climbing out of the pit') :
◦ Productivity as a barrier to delivery performance
◦ QAP as a "driver" for improvement and resource deployment
(Example – Molex - Pins)
◦ Overuse versus customer/consumer expectations
(Example - Earthgrains)
◦ Data-based Customer/Product Rationalization
(Examples - Inland Steel Bar Company & Earthgrains)
Profound knowledge possesses the potential to serve as the
single most valuable element in the strategic/business
planning process by creating those systems (accompanied
by the requisite discipline) which will allow the organization
to generate strategic, business, and human/financial
resource deployment plans; which will constitute working
documents rather than decorative appendages
Model
Business Performance Excellence is achieved when an
organization is generating the maximum level of profitability
possible given the human, financial, capital, and other
resources it possesses

Model
Business Performance Technology is a collection of
strategies, methods, and tools utilized to achieve both
strategic breakthroughs and tactical improvements in key
financial performance and non-financial indicators (KPIs and
NFIs)
The BPE Model
as a Ladder for
Climbing Out of
the Pit
Business Performance Technology
A Collection of Strategies, Methods, and Tools Designed to
Achieve Continuous or
Breakthrough Improvements in the Performance of
Organizations as Measured By Critical
Financial and Non-Financial Indicators
Data-Driven
Disciplines
Human
Interaction
Disciplines

THEORY
THEORY
Cognitive
Psychology
Scientific
Theory
Systems
Theory
Statistical
Theory
Organizational
Theory &
Behavior
Systems
Theory
Performance
Improvement
Strategies
Cost

Reduction
Strategies
Business
Process
Improvement
Strategies
Management
Systems
Improvement
Strategies
Primary Phases / Components of the BPE
Model
Phase I of the BPE improvement process is Policy
Deployment (Hoshin Planning or Hoshin Kanri), which is
intended to integrate an organization’s strategic and
business plans with its vision, mission, value proposition,
core competencies, and each individual’s annual work
plan(s)
Model
Phase IIA of the BPE Model is the implementation of a Total

Asset Utilization (TAU) model, followed by the
implementation of a Consumer / Customer Product /
Process Rationalization (CPR) model.
These strategies are predominantly diagnostic, and are
intended to guide management in making the changes
required to achieve BPE. These topics will be reviewed in
EMEN 5041.
Model
Phase IIB of the BPE Model requires the implementation
(concurrently with Phase IIA) of a Customer Quality
Assurance (CQA) model. This model is also often referred to
as a Customer Satisfaction Improvement (CSI) model or
program. (Unit 3 – EMEN 5040)
Phase III of the BPE model is Daily Management; which
includes the systems associated with Employee Involvement
(Unit 2 – EMEN 5040)
The BPE
Model at
50,000 Feet
Issues and Problems with BPE
HARD WORK!
Difficult to understand, explain in places

Application to services difficult for some to visualize
Unwillingness by some to appropriate other’s ideas
Still relies on managerial judgment and insight!
Courtesy Stephen Lawrence, LSB, CUB
An Overview of Strategic
Planning and Policy
Deployment
P H A S E I I N A C H I E V I N G B U S I N E S S P E R F
O R M A N C E E XC E L L E N C E
Reading Assignments for Lecture 1
Introduction to BPE
Primary Readings - Required:
◦ Introduction to the Business Performance Excellence Model
(Luftig
& Ouellette)
◦ Hoshin Kanri: Deploying Your Strategic Intents to Acieve
Business
Excellence (Luftig & Ouellette)
◦ Management & Control of Quality (Evans & Lindsay)
Reading Assignments for Lecture 1

Introduction to BPE
Support Materials – Highly Recommended:
◦ Treacy & Wiersema HBR Article on Models for Strategic
Differentiation
◦ ‘Why Balanced Scorecards Fail’ (Article)
◦ Inovonics Sample Vision & Mission Statements
◦ Article (Motor Trend) on the Current State of Ford Motor
Company
◦ Additional Articles and Materials Identified Throughout the
PowerPoint Presentation, Including Videos
History & Development of the Hoshin
Planning / Policy Deployment Model (BMGI)
The Purpose of Policy Deployment:
Establishing the ‘Point of the Compass’
Typical Structure w/Out An
Integrated Policy
Deployment System
Initial Result Achieved After
Implementing a Policy

Deployment System
Final Result Achieved After
Implementing a Policy
Deployment System
Policy Deployment: Definitions
"Refers to the process of internalizing policies for Kaizen
throughout the company, from the highest to lowest levels .
. ."
"Policy Deployment calls for everyone to interpret policy in
light of his own responsibilities and for everyone to work
out criteria to check his success in carrying out the policy."
Masaaki Imai
Kaizen: The Key to Japan's Competitive Success
Policy Deployment: Definitions
“…a tool used to facilitate the creation
of business processes that result in a
sustained competitive advantage in
Quality, Delivery, Cost, and Innovation”
- BMGI

Policy Deployment: Definitions*
Total Quality Engineering (1997) says hoshin kanri is:
“a system of forms and rules that encourage employees to
analyze situations, create plans for improvement, conduct
performance checks, and take appropriate action.”
Integrated Quality Dynamics (1997) defines hoshin as:
“a one-year plan for achieving objectives developed in
conjunction with management’s choice of specific targets
and means in quality, cost, delivery, and morale.
*R.G. Lee and B.G. Dale
Policy Deployment: Definitions*
Eureka and Ryan (1990):
“Deploy and share the direction, goals, and approaches of
corporate management from top management to
employees, and for each unit of the organisation to conduct
work according to the plan. Then, evaluate, investigate and
feed back the results, or go through the cycle of PDCA
continuously and attempt to continuously improve the
performance of the organisation.”
Policy Deployment:
Understanding the Concept

Policy Deployment:
Policy Deployment:
Musashino Brewery, Suntory
Policy Deployment:
Policy Deployment:
Policy Deployment:
Policy Deployment:

Policy Deployment:
ALCOA Aerospace – Engineering Group
Policy Deployment: Understanding the
Concept
ALCOA Aerospace – Sales & Marketing
Policy Deployment:
Metal Container Corporation – Newburgh, N.Y.
Policy Deployment:
U.S. Naval Aviation Strategic Management
Policy Deployment:
Understand the Concept…
But Beware of Benchmarking in the Absence of Profound
Knowledge
http://dilbert.com/strip/1991-03-13

Overview of the Steps Required for Policy
Deployment
Establish /
Reaffirm
Vision
Deployment
Visions, Values, Beliefs, Guiding Principles
Vision statements generally encompass a 15-20 year period,
and describe in very broad terms the aspirations of the
organization.
Often accompanied by Values, Beliefs or Guiding Principles
which describe, on a broad philosophical level, those underlying
premises upon which the company is based.
These are often stated in the context of founding principles, and
are provided to each employee when he or she is brought into
the organization.
Deployment
Establish /

Reaffirm
Mission
Establish /
Reaffirm
Vision
Deployment
Corporate / Company Mission Statement
The mission statement for the organization is based upon the
values or guiding principles of the firm, and represents a 3-5
year subset of the Vision. In broad terms, the Mission Statement
identifies:
1. What the organization does;
2. Who are the primary customers of the firm's product(s) and /
or service(s); and
3. On a short-term (relative to the Vision) basis, where the
organization is attempting to go, and how it will 'appear'
when it arrives.
Rules for Vision and Mission Statements
Never state anything that you do
not intend to measure, and
subsequently allocate resources

to achieve.
If it is critical to your organization,
always state it.
Never state anything that makes
the management team look
foolish. Or…. http://cmorse.org/missiongen/
http://cmorse.org/missiongen/
Examples of Vision and Mission
Statements - Inovonics
Statements - Inovonics
Statements – PDF Files
Two PDF files have been provided on the course website for
your review of Vision and Mission Statements from a
number of different companies:
- ‘Fasco Motors – Asia/Pacific’; and
- ‘Sample Statements from Diverse Organizations’
Let’s review them now, together.
Fasco Asia Pacific Vision_Mission.pdf
Assorted Vision and_or Mission Examples.pdf

Deployment
Establish /
Reaffirm
Mission
Establish /
Reaffirm
Value
Proposition
Establish /
Reaffirm
Vision
Deployment
Value Proposition
The Value Proposition for a firm describes those compelling
value-added elements or features of its products &/or services
that determine why a customer would/should purchase goods
or services from the organization rather than from its
competitors.

As related to an internal support function (e.g. finance &
accounting, information services, human resources, etc.), a
Value Proposition defines why the organization conducts the
activity internally, rather than having the function outsourced.
Support Your Value Proposition (IT).pdf
Rules for Value Propositions
The Value Proposition must resonate with the consumers /
customers, not the management team.
The Value Proposition should be closely aligned, but is not
interchangeable, with the firm’s Core Competencies.
Core Competencies
Customer Value
◦ Core competencies are the skills, technologies and disciplines
that enable a
firm to deliver a fundamental customer benefit and make a
disproportionate
contribution to customer-perceived value.
Competitor Differentiation
◦ Core competencies are difficult for competitors to imitate.
Other competitors
may have a similar capability (in many cases, these are skills
required to
participate in an industry), but to be a core competency the
company’s level
of capability must be substantially higher than that of its

competitors.
Extendibility
◦ The skills, technology, and discipline must provide access to
an array of other
products and services to be considered a core competency; it
must be a
gateway to future as well as current markets.
Sample Value Proposition - Inovonics
Sample Value Proposition:
G.E. / Ionics-Sievers
IBG products provide answers nobody else’s products can,
facilitated by a superior understanding of our chosen
markets’ requirements
IBG provides its customers superior aftermarket products
and services compared to our competition
IBG provides its customers the means to confidently achieve
and maintain compliance and/or improve profitability
Deployment
Establish /
Reaffirm

Mission
Establish /
Reaffirm
Value
Proposition
Identify/
Reaffirm
Model for
Strategic
Differentiation
Establish /
Reaffirm
Vision
Models for Strategic Differentiation
Models for competing for business based upon a
methodology for achieving a competitive advantage.
The Model selected must be consistent with the firm’s Value
Proposition, and must be deliverable based on the firm’s
Core Competencies.

Porter’s Breakdown for Competitive Positioning
1980’s – 1990’s
Models for Strategic Differentiation:
Treacy & Wiersema
'Standard' Models for Differentiation and the Achievement
of Profitability
Operational Excellence
◦ (Best Total Cost)
Product Leadership
◦ (Best Product)
Best Total
Solution
◦ (Customer Intimacy)
Models for Strategic Differentiation

Treacy & Wiersema
Premises for Model Selection:
◦ Differentiation and profitability cannot be achieved and
maintained unless an organization selects a single approach; and
subsequently devotes the majority of its financial and human
resources to the goals and objectives inherent to each approach.
Treacy & Wiersema
◦ Market Leaders Choose One Value Discipline in Which To
Excel;
and Maintain Market Parity on the Other Two; Choosing a
Discipline is the Choice of Winners.
◦ Failure to Choose:
◦ Creates Confusion, Tension, and Loss of Energy

◦ Makes It Virtually Impossible to Resolve Resource-Related
Conflicts & Set Priorities
◦ Creates Complexity That Results in Doing Business Internally,
Rather Than with Customers
Treacy & Wiersema
◦ Selecting a particular model for a Strategic Direction does not
imply the abandonment of all other tactical efforts to maintain
competitive parity and competence inherent to the alternative
models; for example, selection of an Operational Excellence
approach does not preclude the conduct of product research;
however
Treacy & Wiersema
◦ Management must achieve consensus about the concept that,

strategically speaking, non-value added activity consists of
those
efforts not directly and truly associated (rather than
rationalized)
with the characteristics inherent to the selected approach.
◦ Finally, the Strategic Direction selected must be consistent
With
The Vision, Mission, and particularly the Value Proposition of
the
organization.
Treacy & Wiersema
Provide an unmatchable combination
of quality, delivery, price, and ease of
purchase
Execute extraordinarily well
Value proposition is guaranteed best
total cost and hassle-free service

All processes are optimized and
streamlined to minimize costs and
hassle factor
Reflects a culture that abhors waste
and rewards efficiency
Operations are standardized,
simplified, tightly controlled &
centrally planned, leaving few
decisions to individual discretion
Management systems focus on
integrated, reliable, and high speed
transactions which value compliance
to norms
General characteristics of a model based on Operational
Excellence
(Best Total Cost)

Treacy & Wiersema
Continually pushing product into
unknown or highly desirable areas
Consistently striving to provide leading
edge products or new applications for
existing products
Ability to commercialize quickly
All business processes engineered for
speed
Relentless pursuit of product
innovation
Equally relentless willingness to
obsolete existing product
Product leaders avoid bureaucracy at
all costs
Decisions made quickly and cycle times
low

Leaders jealously protect & nurture
entrepreneurial environment
Focus on core processes of invention,
product development, and market
exploitation
General characteristics of a model based on Product Innovation
(Product Leadership)
Treacy & Wiersema
Deliver to specific customer needs, not
broad market requirements
Know the people you sell to & exactly
what products & services they need
Continually tailor products & services
at reasonable prices

Customer loyalty a key asset; cultivate
relationships rather than pursue
transactions
Give the customer more than they
expect, constantly upgrading offerings
Consider customers a lifetime value,
not just profit & loss on a few
transactions
Tailored mix of services or customized
products; using 3rd parties to
supplement internal activities
Obsession with solution development,
results management, and relationship
management
General characteristics of a model based on Best Total

EMEN 5040Quality, Strategy and Value CreationAchieving B.docx

Recommended

Recommended

More Related Content

Similar to EMEN 5040Quality, Strategy and Value CreationAchieving B.docx

Similar to EMEN 5040Quality, Strategy and Value CreationAchieving B.docx (20)

More from SALU18

More from SALU18 (20)

Recently uploaded

Recently uploaded (20)

EMEN 5040Quality, Strategy and Value CreationAchieving B.docx