Thursday, May 24, 2007

Quality is a cyclical strategy

Product quality (or lack thereof) is often more a business strategy than a manufacturing failure. It may not be a conscious strategy but the cumulative effect of un recognized behavioral reinforcing loops within a company's processes.

Like most of human activity, quality levels run in cycles. These cycles have turning points or end limits defined by a crisis situation. (Management by crisis resolution) Often it goes something like this:
Quality is decreased improving margins and/or price competitiveness. This winning strategy persists until customers will no longer buy your product again because they do not want to see another premature failure. Examples include Sunbeam, US Steel, GM and Mercedes Benz.

Then, to increase market share or even save the company, quality is increased. Sales improve as existing customers purchase again and new customers are attracted by the now higher reputation for quality. The company can now charge a premium greater than the increased cost of higher quality. The improvement continues until the price premium exceeds the level customers are willing to accept before switching to a lower priced, lower quality alternative. Examples include IBM personal computers and Mercedes Benz. See article below.

Beware the Product Death Cycle

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