Quality Management System and Corporate Sustainability

Quality Management System and Corporate Sustainability

Pradeep Joshi

Executive Summary

The current market conditions are Vulnerable, Uncertain, Complex and Ambiguous. The Corporates should embrace the Innovation and Innovative processes to survive in market place. This means customer requirements have been more demanding and equally challenging for corporates to sustain in terms of delivery of desired product of customer in given timeframe and at acceptable prices for customer.

There is need for Corporates to follow Quality Systems based on Lean Organization and aiming to deliver at low prices, less waste and least variability in product. This calls for using Lean Six Sigma Methodology that emphasizes on reducing waste, costs and innovating design and technical process selection.

This basically includes Innovation and precision of forecasts, agility to face challenges, flexible strategy by Corporate to sustain in long run.

All The Stakeholders namely Investors, Society, Environmental Agencies and Governmental Regulatory Agencies has to appreciate the outcomes of Corporates efforts not only of Product delivery to Customer demands but other parameters set out by them for evaluation of corporates existence.

The result of facing such challenges have forced Corporates to come with New Business Models that may disrupt existing Corporates not willing to change and accept innovation in product design, business process and practices. The investors take notice of such failures of corporates and withdraw capital from them. This creates more ambiguity in tolerance of Investors towards Corporates. An attempt is made to highlight the Lean Six Sigma and Six Sigma Methodologies’ basic nature and its usage to overcome VUCA challenge. This also applies to start ups where startups have to face everyday a new challenge.


Key Words
Benchmark, Business Model, Balanced Scorecard, Corporate Sustainability, Disruptive Business Model, Innovation, Lean Organisation, Lean Six Sigma, Six Sigma, Startups, Quality Management System, VUCA Challenge.


Objective

The objective of this paper is to elaborate the use of Quality System on creating Sustainable strategies of Corporates.


Introduction

“94% of Problems in Business are systems driven and only 6% are people driven.” W. Edward Deming.

“You can’t do today’s job with yesterday’s methods and still be in business tomorrow.” Nelson Jackson.

Lean Thinking focuses on 8 Waste

1.Defects 2. Overproduction 3.Waste 4.Not utilising Employees (knowledge, skills, abilities) 5.Transportation 6. Inventory 7. Motion 8.Excess Processing (DOWNTIME)

Lean manufacturing=Lean focuses on the removal of waste, which is defined as anything that is not necessary to produce the Product or service. The M’s of Waste=Muda (waste), Mura (Unevenness), Muri (overburden);

“Toyota Production System is 80% waste Elimination, 15% Production System and only 5% kanban.” Shigeo Shingo

Quality is considered as significant aspect of any product or service by Customer and the Service Provider. From Customer perspective it is only criteria that matters when customer buys any product or service.

Hence all Manufacturers or Service Providers take the customer requirements into account while making product/service; and Technology, Men, Material, and Methodology that combines all to give a Product. Simultaneously, tries to avoid its negative impact on social, environmental system.

Corporate sustainability strategies can aim to take advantage of sustainable revenue opportunities, while protecting the value of business against increasing energy costs, the costs of meeting regulatory requirements, changes in the way customers perceive brands and products, and the volatile price of resources.

1. Innovation & Technology

This introverted method of sustainable corporate practices focuses on a company's ability to change its products and services towards less waste production and sustainable best practices.

2. Collaboration

The formation of networks with similar or partner companies facilitates knowledge sharing and propels innovation.

3. Process Improvement

Continuous process surveying and improvement is essential to reduction in waste. Employee awareness of company-wide sustainability plan further aids the integration of new and improved processes.

4. Sustainability Reporting

The Periodic reporting of company performance in relation to goals is essential. These goals are often incorporated into the corporate mission (as in the case of Ford Motor Co.).

Ford's vision statement is “people working together as a lean, global enterprise for automotive leadership.”

The company also explains, “Automotive leadership is measured by the satisfaction of our customers, employees, investors, dealers, suppliers and communities.”

The mission and vision of Amazon.com is: "Our vision is to be earth's most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online."

“Continuous process surveying and improvement is essential to reduction in waste; corporate mission; a lean, global enterprise; most customer-centric company, measured by the satisfaction of our customers, employees, investors, dealers, suppliers and communities”; These are all terms that are part of Quality Systems Management and Lean Organization.

The term "lean" was coined to describe Toyota's business during the late 1980s by a research team headed by Jim Womack, Ph.D., at MIT's International Motor Vehicle Program.

"Just as a carpenter needs a vision of what to build in order to get the full benefit of a hammer, Lean Thinkers need a vision before picking up lean tools," said Jim Womack. "Thinking deeply about purpose, process, and people is the key to doing this." Simply, lean means creating more value for customers with fewer resources. A lean organization understands customer value and focuses its key processes to continuously increase it. The ultimate goal is to provide perfect value to the customer through a perfect value creation process that has zero waste.

“Lean defines value as providing benefits to customer, anything else is waste.” Eric Ries.

“Perfection is not attainable, but if we chase perfection, we can catch excellence.” Vince Lombardi.

“Lean Manufacturing is at core of our strategy to support our growth. You have to take waste out of everything. We are only willing to do things that our customer is ready to pay for.” David Buck. [2]

Additionally, companies might consider implementing a sound measurement and management system with readjustment procedures, as well as a regular forum for all stakeholders to discuss sustainability issues.[3]

The Sustainability Balanced Scorecard
is a performance measurement and management system aiming at balancing financial and non-financial as well as short and long-term measures. It explicitly integrates strategically relevant environmental, social and ethical goals into the overall performance management system and supports strategic sustainability management.[4]

The Indian companies are preparing to counter the Vulnerability, Uncertainty, Complexity and Ambiguity [VUCA] of Market Place by Innovating the Business Process and Business Practices with the help of Technology and Quality Improvement Techniques to reduce waste and lowering cost of Product or Services and adding extra value where ever possible. The Lean Six Sigma and Six Sigma Methodology embrace Innovations in process selection and design of product, to accommodate Voice of Customer. Lean and Six Sigma Methodology emphasizes the need to reduce variation in process and reducing waste and time along with savings in cost ,if any, by meeting performing standards set newly.

Quality Function Deployment is the technique consisting of series of interlocking matrices involving Customer needs into Process and Product Characteristics .Eventually giving design of Product and Design of Process. This takes into account the various aspects of Benchmarking, Technology and Raw material quality weighed against Customer Requirements.

The Corporate needs to Benchmark process and design vis-à-vis, competitor’s design and process parameters by conducting survey and analysing data collected. And decide to go for Best in Industry or Best in Any Industry.

This now provides key characteristics that are used to formulate the business development strategy of a Corporate.

1. Consistent Quality

2.High Performance Products

3.Fast on time and dependable deliveries

4.Offer Low Prices.

5. Introduce new designs/product quickly

.6.Offer a broad product line.

7. Advertise and Promote Effectively.

8.Broad Distribution

9.Rapid Volume Change (Scalability)

10.After Sales Service. [5]

Thus precision foresight and agility, Strategic Innovations will have lasting impact on survival of Corporate. Also Local Companies should focus on acquiring Global competencies, and maintain revenue shares. Thus it is important for companies to orchester combinations of creation, selection and delivery of ideas; how to engage and assimilate opportunities to create and continuously deliver competitive products.

The Corporates on other hand should be
1. Entrepreneurial and Innovative.

2.Build Passionate Team

3. Harness Personnel Competencies

.4.Assess needs of Potential Customers,

5. Counter competitive challenges,

6. Choose right location,

7. Flexible strategy inclusive of growth strategy.

8. Choose Right market.

9.Learning from past mistakes.

The Forbes survey for Top 100 Innovative firms includes North Americas (51), Europe (17) and ASIA (22). The top of the list had firms such as Salesforce.com, Tesla Motors, Amazon.com, Netflix, Incyte and Regeneron Pharmaceuticals from the USA, while Shanghai RAAS Blood Products from China, and Naver belonged to South Korea. Interestingly Hindustan Unilever and Asian Paints from India got an entry into top 10 innovative firms. Surprisingly, old horses like Microsoft, Google, Apple, Samsung, Motorola, Toyota, Honda, Daimler Benz, Caltex and Exxon have lost the race to be termed highly innovative firms. Is it the speed, precision and innovativeness that drive firm’s existence in a VUCA world? [6]

Thus the need of the hour is To Build new Business Models to suit competencies and make Capital available and disrupt the existing Business Model/s. The Business Models are focusing to address directly customers. Hence many B2B Models are now converting into B2C. The Advertising companies are looking at Technology as an option to make use of Digital Marketing Platforms.

Investors View

The Investors in Market take notice of such changes in Business Models to back a corporate with disruptive business model by investing in and also back out from those which have disrupted business model/s. [CNBC 18 discussions of Investors for 2018 Investment forecast on 23-12-2017]

Sustainability reporting—part of Global Reporting Initiative

A sustainability report is a report published by a company or organization about the economic, environmental and social impacts caused by its everyday activities.[7]

A sustainability report is an organizational report that gives information about economic, environmental, social and governance performance.[8]

Sustainability reporting has emerged as a common practice of 21st-century business. Where once sustainability disclosure was the province of a few unusually green or community-oriented companies, today it is a best practice employed by companies worldwide.

Sustainability reporting, as an enabler, is a key tool that can advance the private sector contribution to global development.

Sustainability disclosure can serve as a differentiator in competitive industries and foster investor confidence, trust and employee loyalty. Analysts often consider a company’s sustainability disclosures in their assessment of management quality and efficiency, and reporting may provide firms better access to capital.

The Benefits include

1. Better reputation

2. Meeting the expectations of employees.

3. Improved access to capital

4. Increased efficiency and waste reduction (with use of Quality Systems)

Sustainability reporting requires companies to gather information about processes and impacts that they may not have measured before. This new data, in addition to creating greater transparency about firm performance, can provide firms with knowledge necessary to reduce their use of natural resources, increase efficiency and improve their operational performance.

In addition, sustainability reporting can prepare firms to avoid or mitigate environmental and social risks that might have material financial impacts on their business while delivering better business, social, environmental and financial value — creating a virtuous circle.

For reporting to be as useful as possible for managers, executives, analysts, shareholders and stakeholders, a unified standard that allows reports to be quickly assessed, fairly judged and simply compared is a critical asset. As firms worldwide have embraced sustainability reporting, the most widely adopted framework has been the Global Reporting Initiative (GRI) Sustainability Reporting Framework.[9]

On Feb.15, 2017, Tuesday, the Global Reporting Initiative (GRI) launched the first global standards for sustainability reporting in Mumbai in collaboration with BSE Ltd, Confederation of Indian Industry (CII) and Yes Bank Ltd.

GRI is an international, independent standards organization that helps businesses, governments and other organizations understand and report on their impacts on issues such as climate change, human rights and corruption.

Founded in 1997, GRI has from time to time issued guidelines that businesses can use to report non-financial information. It has 95 member countries that follow the GRI guidelines in reporting.

In India these are the basis of the National Voluntary Guidelines (NVGs) drafted by the ministry of corporate affairs in 2012. Under NVGs, as per the 2012 directive by Securities Exchange Board of India (SEBI), top 100 companies as per market capitalisation are required to release Business Responsibility Reports (BRRs) based on the NVGs; this has been extended to 500 companies beginning April 2017.

These are a set of 36 modular Standards that facilitate corporate reporting on topics such as greenhouse gas emissions, energy and water use, and labour practices.

The latest GRI-G4 guidelines have been in use for the last two years, which have been taken as the basis for the new standards. GRI deputy chief executive Teresa Fogelberg said, “GRI Standards... will enhance transparency around business impacts on some of the most pressing issues facing humanity including combating climate change, promoting human rights and ensuring gender equality, to name only a few.”

At the launch in Mumbai, Neeraj Kulshrestha, chief of business operations, BSE, said, “We at BSE believe that sustainability of business is now a priority and not merely an option... Companies listed at BSE are encouraged to adopt the best practices on disclosure of sustainability measures they follow. Widespread adoption of the GRI Sustainability Reporting Standards will be a leap forward towards not only complying with green initiatives but also opening avenues for profound positive effect on business.”

BSE Ltd is the first stock exchange from Asia to sign the Sustainable Stock Exchange initiative.[10]

Another vital benefit for Indian companies looking to report with the GRI Standards is that they can be used to comply with the Business Responsibility Reporting (BRR) requirements mandated by the Securities Exchange Board of India (SEBI).

Earlier this year, GRI released a linkage document in collaboration with the Bombay Stock Exchange (BSE) to provide guidance on linking the disclosures under these two frameworks.

In addition to building reporting capacity and quality, GRI South Asia is also gathering business momentum to align corporate reporting in the region with the United Nations’ Sustainable Development Goals (SDGs). 

This regional initiative of GRI, already includes several top names from the Indian corporate sector, such as Aditya Birla Group, Ambuja Cement, GAIL (India) Limited, ITC, Jindal Stainless, JSW Group, Jubilant Life Sciences, Mahindra & Mahindra Limited, Power Grid Corporation India Limited, Reliance Industries Limited, State Bank of India, and Tata Consultancy Services.

The remaining seven dialogue forums, over the course of the coming two years, will spotlight several individual topics such as poverty and economic growth, investor expectations, food security, health, equality and education, management of natural resources, and stakeholder inclusiveness.[11]

Trends in Emerging Markets

Right now more than 20,000 multinationals are operating in emerging economies. According to the Economist, Western multinationals expect to find 70% of their future growth there—40% of it in China and India alone.

But if the opportunity is huge, so are the obstacles to seizing it. On its 2010 Ease of Doing Business Index, the World Bank ranked China 89th, Brazil 129th, and India 133rd out of 183 countries.

Summarizing the bank’s conclusions, the Economist wrote, “The only way that companies can prosper in these markets is to cut costs relentlessly and accept profit margins close to zero.”,

What’s often missing from even the savviest of these efforts is a systematic process for reconceiving the business model. For more than a decade, through research and our work in both mature and emerging markets, we have been developing our business model innovation and implementation process (see “Reinventing Your Business Model,” HBR December 2008, and “Beating the Odds When You Launch a New Venture,” HBR May 2010).

At its most basic level, the process consists of three steps: Identify an important unmet job ,a target customer needs done; blueprint a model that can accomplish that job profitably for a price the customer is willing to pay; and carefully implement and evolve the model by testing essential assumptions and adjusting as you learn.

The Example of Godrej is discussed fully from Consumer Opinion, Involvement in & to Product development stage.

Business models can be conceived in a variety of ways. Our approach focuses on the basics and also on factors that make it difficult to move from an existing model to a new one—margin requirements, overhead, and “resource velocity” (the capacity to generate a given volume of business within a specific time frame).

It has four parts: the customer value proposition, a profit formula, key processes, and key resources the company must use to deliver the CVP repeatedly and at scale. Creating competitive advantage lies in integrating these elements to produce value for both the customer and the company. [15]

Conclusion

1. Corporate sustainability needs to focus on satisfying all stakeholders and ecology as well.

2. Corporate sustainability has to take into account the changes in Technology, customer needs, to create innovative approaches in Growth Strategy based on new Business Model in shortest time.

3. Corporate sustainability is also now captured in the form of Sustainability Reports based on GRI Standards.

4. Corporate Sustainability has been crucial for survival and retaining confidence in Investors.

5. Lean Methods and Lean Structure (part of Lean Six Sigma) are needs of the hour for Existing Businesses and Startups to remain Lean and agile and continue to add value to Customer.

6. Changes in Emerging markets underline the need of absolute alignment of Business Models and deliver value to Customer repeatedly and at a scale.

References


1. https://en.wikipedia.org/wiki/B_Corporation_(certification)

2. http://www.lean.org

3. Hoessle, Ulrike: Ten Steps Toward a Sustainable Business (=WWS Series 1). Seattle 2013. ISBN 978-0-9898270-0-

3, http://www.wwsworldwide.com.

4. Tueth. Matthew Ph.D (2010). Fundamentals of Sustainable Business| A Guide to the Next 100 years. Hackensack: World Scientific Publishing Co.

5. Quality Planning and Analysis by J.M. Juran and Frank M. Gryna.

6. Dr.Aseem Chauhan, Manoj Joshi and Suhayl Abidi, Indian Management, Dec.2017, pages 73-78

7. https://www.globalreporting.org/information/sustainability-reporting

8. https://en.wikipedia.org/wiki/Sustainability_reporting

9. http://www.ey.com/us/en/services/specialty-services/climate-change-and-sustainability-services/value-of-sustainability-reporting

10. http://www.livemint.com/Companies/XRx5fEQ95d92M0hRF2hOoO/GRI-sustainability-reporting-standards-launched.html

11. https://www.globalreporting.org/information/news-and-press-center/Pages/Leading-Indian-companies-join-GRI%27s-reporting-network.aspx

12. http://www.itcportal.com/about-itc/profile/the-itc-way.aspx

13. https://www.lean.org/events/webinarhome.cfm#lessons<

14. http://www.republicworld.com/s/8982/in-the-digital-economy-innovation-is-the-only-way-ahead-for-startups

15. https://hbr.org/2011/01/new-business-models-in-emerging-markets

Pradeep Joshi;Six Sigma Consultant;

email_id=99.pradeep@gmail.com