Strategy Dynamics Briefing 79: Quality-related intangibles

Posted by:

“Quality management” has been of central importance to the outstandingly effective operation of huge numbers of admired companies. But quality is of considerably more importance than merely to make firms cost-efficient and reliable. Quality-related intangibles are of critical importance to the strategic progress of organizations. That is, it has a substantial impact on medium- to long-term development. Intangible quality-related resources show up in many forms:

  • Every aero engine that comes off the production lines comes with a large number of manufacturing faults. (Do not be too; these are just small deviations from specification that may marginally affect performance or reliability!)
  • Every software package includes bugs of some kind, an example that illustrates the tricky trade-off suppliers face. Users might prefer the software to be worked on until the probability that they personally will experience any bug at all is infinitesimal. Unfortunately, that would take so much effort and take so long that the software would never actually be launched.
  • We might prefer that a new car we purchase is entirely free of faults, but manufacturers would have to work for many years to achieve an absolute guarantee of zero defects. In spite of Six Sigma and other approaches to quality, it is still never possible to eliminate entirely the possibility of faults in all kinds of manufactured goods.

You might like think more positively, in terms of how close to perfection you are, but many quality indicators are so close to 100% that a more meaningful measure is the opposite – the percentage, or fraction of a percentage, by which you are short of perfection. In contrast with the zero-to-one scales that were appropriate for many psychological intangibles earlier in this chapter, appropriate measures for quality resources will be more specific (Table 1). Note that some of these quality indicators may not be knowable accurately without unrealistic efforts being made over unrealistically long periods. Incidentally, ‘quality-related intangibles’ are not to be confused with the quality ‘attributes’ of tangible resources discussed in Briefings 24-30.

Table 1: Measures for quality resources and non-resource quality factors.

Intangible quality resource Common measure Units
manufactured production yield reject rate fraction rejected
chemicals quality purity fraction of impurities
manufactured product quality reported faults average faults per 000 units
software quality bugs total bugs

To illustrate the link between a quality resource and user-experienced quality, Figure 1 shows progress being made in improving quality for a very simple software application, tailor-made for a group of just 1000 users. The software is released to the users with 100 bugs, although that number is not known either to the users or developers. As the software starts to be used, users discover the bugs and report them to be fixed. The bugs are gradually fixed by a small team who work to resolve them. However, these bugs continue to be experienced by users until such time as the fix is made and deployed.

Figure 1: Working off bugs discovered in a piece of software. (Click image to view larger)

Working off bugs discovered in a piece of software

In both scenarios, the initially high discovery rate of unknown bugs falls very sharply because of the large number of user-days to which the software is exposed. Nevertheless, this does not eliminate the unknown bugs entirely, even after many months of use, because the probability of any particular user making use of a feature in exactly the way that gives rise to a bug event falls to a very low value.

In the first case (green lines and text) a team of five staff struggle to work off the known bugs, and have failed to reduce that number significantly even after 12 months. In the second case (gray lines and text), a larger team manages to work off the known bugs more quickly. Surprisingly, however, this considerable overall reduction in known bugs is not reflected to the same degree in the total bug-events that users experience over the two-year episode, due to the large number of new bug events that users continue to find.

Until next time…


If you would like to receive the series from the beginning in your email inbox, please register on the strategy Dynamics website and subscribe to Briefings in “My Account”

Not all ‘quality’ indicators are resources

Take care – many quality measures can move immediately, depending on the factors that drive them, so are not ‘resources’ in that they don’t accumulate or deplete over long periods of time.

If a retail store offering good service quality finds that 5 of its 20 staff do not show up for work one day, its service quality will instantly suffer. If those same employees show up again on the following day, service quality will jump back to its normal level. An airline suffering a serious breakdown on one of its aircraft may find that its on-time performance instantly drops, but recovers when the breakdown is fixed. A football team suffering injuries to three of its key players can expect its performance to drop immediately, but perform well once more when their injuries recover.

Strategic Management Dynamics book coverA law firm winning a major engagement that pushes workloads well above the capacity of its staff will deliver poor work, either to this project or more likely to others—client enquiries will go unanswered, paperwork will be delayed, and so on—but quality will recover when that engagement ends.

This briefing summarises material from chapter 9 of Strategic Management Dynamics, pages 610-615.

Read more about the book on our website

  Related Posts

Add a Comment