Cost-of-Quality: COQ is a relative term!

Components of the Cost-of-Quality in Kaizen parlance are as follows.

1/ Costs of external-failures incurred due to failures at customer's end.

2/ Costs of internal-failures incurred in order to handle failures at supplier's end.

3/ Costs of appraisal incurred in order to inspect/audit the adequacy and compliance of quality and quantity of work, and the workmanship as well, as per standards/procedures.

4/ Costs of prevention incurred in order to undertake improvement or failure-prevention activities (as preventative/proactive measures) & corresponding education/training for the same.

First two components are the 'cost-of-poor-quality' (CoPQ) that are incurred after failures. 

Last two components are the 'cost-of-good-quality' (CoGQ) or you can say 'investment' required to prevent a failures in the first place.

The components, rather it's terminology, is relative and hence the  term Cost-of-Quality itself is relative! Use of the components may depend upon the context of the situation.

Is the statement: "If the customer needs to administer incoming inspection on his inputs received from the supplier then that's typically the 'cost of appraisal'!", made by a participant in one of my sessions, 'true' or 'false', for instance?

The statement is 'false'!

It's actually the 'cost of prevention' for the customer. Because she wants to prevent defective inputs from going into the next process. Engaging into inspection activities on the customer's own processes or processing activities, although it's a NVA (non-value-activity or waste) however, is the 'cost of appraisal' for the customer in order to prevent the 'cost of internal failure' in the customer's processes.

Whereas the incoming inspection on his inputs may be is the 'cost of external failure' for the supplier. This is particularly so if the customer engages into 'inspection', a NVA (non-value-activity) 'forced' on to her by herself, because of lack of trust (past dissatisfaction) in the supplier's quality and hence in the supplier's brand image.

Also read a few relevant blogposts hereunder:

Do You Force Customers To Quit
In-a-problem ? No-problem! Dwell-a-while!
Customer or Custo-Mer ?  
Experienced A Delightful Payment ! 
An Experience of Heart-and-Soul 
Do you keep curing your brand ?  
A customer gets what s/he deserves: Shoddy Quality!  
Listen to iceberg of VOC to acquire customers 
Less With More And More Gets Sore 
Should one care for value ?  
Can-changing-thoughts-change-a-nation
Ridiculous Poison-culture versus Maverick Kaizen-culture 
Tolerate Once, Twice, Thrice?  
The Business Of Businesses 
That's how some business partnerships work 
Taken-For-Granted ? You Deserve It !! 
Strategise To Achieve Targets Daily 
Does recognition really matter 
That's How Morons Work
Simplicity Of Theory Of Relativity

How important is a strategic plan for business?

Everyone out there is to sell something to someone. That's called as business in business language.

In today's VUCA (volatile, uncertain, complex, ambiguous) world the sellers seem to outnumber the buyers. If yet not, then they will eventually do. Because, Everyone out there is to sell something to someone.

Naturally, it's important to answer a few questions before setting out to do business without bankruptcy.

How to do business with limited access to resources?

That's where comes the role of strategy.

In order to evolve strategy you need to probe into yourself as also into your business environment. It'll help you to do PEST and SWOT analysis as they say and do in business. PEST and SWOT you need to do both at personal as well as business level.

You need to know Where you want to go?
With what (offering) and how?

In order to do this adequately, you should've heard and read the VOC Voice-of-Customer.

Strategies derived earlier will help you to translate the VOC into delivery of the delightful offering to customer duly differentiated from competition and of course with cost leadership. Unless, of course, you want to drive volume leadership at calculated loss by design.

Now you need a daily control over the strategy to stay ahead of competition and stay successful sustainably.

How often do you hear VOC

Given an opportunity, which air-conditioner would you buy: split or window?

Would you buy 'split' at the price point of the 'window' unit?

Of course, I would go for 'split' at the price point of the 'window' unit. Less noise at lesser price! 

But I've not done so yet.
Not because the split unit is not available at the price point of the window unit but because I've been on a search for a split air-conditioner of which the diffuser is small enough to fit into the opening for a window air-conditioner. I am yet to be delighted on such an offering.

Like in most houses provision for a window unit is a given. 

Same isn't the case for a split unit which actually needs a smaller hole, much smaller than one for the window unit. Is it a design-flaw or is the exclusion itself by-design?

Whatever may be the case but above paragraphs have some Voice Of Customer (VOC) hidden in there that has potential to differentiate an offering. 

1/ For a builder-developer and an architect by providing a hole for a split unit at construction stage itself. This is to avoid the wastage of breaking the wall open for split unit.

2/ For an air-conditioner manufacturer-designer by making diffuser of a split unit small enough to fit into the opening provided for a window unit. This will create an opportunity for increased sale of the split unit.

From the configurations (see figure) of a typical manufacturer, you may find that none of the diffusers of the 'split' unit fit the 'window' width that is about 660 millimeters (standard). Of course, this is not until someone makes it to fit into the window and makes the customers aware of it thereby pulling 'window' unit customers to buy 'split' unit.

There are many opportunities if marketers and designers choose to innovate by mining into VOC such as above. Differentiated offerings as above could be possible by simple frugal innovations though many real innovations themselves are possible with frugal expenses on R&D if at all.

"How often do you hear VOC?"
Jokingly many reply: "Hardly any! Because she (customer) doesn't speak!"

Although this is fit to be a whatsapp reply, part of it is certainly true.

Customers are difficult to get to speak. Hardly any tell you what they want.
Fewer know what they need although they want to design their own life.
So somehow both the above types get rid of you by filling in the blanks in customer satisfaction survey forms in order to comply to your request. Analysis of such 'tick-marks' on the forms adds a little value if at all. 

If at all any of them do (speak), hardly 4-out-of-100 that are not satisfied with the offering, do so to complain reluctantly.
Rest leave without telling the supplier and join hands with the competitor.

Knowing this well some excellent companies capture VOC proactively.

Komatsu for instance fitted GPS-enabled software (KOMTRAX) in their equipment so that their engineers can capture and 'visualize' customer problems, needs, etc. in real-time as also they can value-add to their operations by updating them on their equipment utilization, etc.

Toyota for instance, fitted micro-phones in their new car models during test marketing so that they could capture 'feelings and expressions' of their customers that could be built into the product before commercially releasing them as competition to their own current models.

So do you have guts to cannibalize your own products before your competitors do?

Can't you make your customer speak, capture it, and build it into your offering faster than your competitor just as the Komatsus and Toyotas did?

Why not? 

Also read a few relevant blogposts hereunder:

Aesthetics Spills-Over Function, Want Spills-Over Need (Part-1)
Aesthetics Spills-Over Function, Want Spills-Over Need (Part-2)
Functional-Aesthetics
WOW Work-Culture: By Telling or Selling
How To Make A Difference
Nauseous Communication Gaps
Judge If It's Paralysis-By-Analysis
Suggestions On-Sale, None-To-Buy
Taken-For-Granted ? You Deserve It !!
Strategise To Achieve Targets Daily
Does recognition really matter
Customer or Custo-Mer ?
Experienced A Delightful Payment !
An Experience of Heart-and-Soul
Do you keep curing your brand ?
A customer gets what s/he deserves: Shoddy Quality!
Listen to iceberg of VOC to acquire customers
Do You Force Customers To Quit
Should one care for value ?
Treat Root-causes, Not Symptoms !
Do You Ask Right Questions ?
Talk In Order To Listen! 

A customer gets what s/he deserves: Shoddy Quality!

A Customer Complaint made to a reputed taxi service in Mumbai was: 

1/ The taxi booked was not found until few minutes after the appointed time. So the driver was called (by customer) to find out his 'whereabouts'.

Taxi was found to be parked away on road. The driver refused to go to customer's colony when requested. He threatened to go away if the customer did not go where the taxi was parked.

2/ Nor had he informed his arrival although he said that he had. In fact, customer called him up a few minutes after 'no-show'. Attached screen-shot of the customer's cell shows 'outgoing' to driver's number but not incoming from his number.

3/ On telephone as well as in person, when the driver was asked 'why he did not come inside the colony' he arrogantly replied: "Our Taxi-Service-Provider gives too much importance to Customer. (In his vernacular language: "Ye Taxi-Service-waleney Customer ko aisa, implying 'chadhake', banaya hai''...and so on).

Supplier's response after over a week of registering the complaint was:

"Please accept my sincere apologies for the inconvenience caused to you."

Where does the above real-life practice fit into business principles?

How should, a service provider wanting to stay and flourish in business, look at a typical customer complaint?

The above transaction is a typical case-study of INDIFFERENCE that should be avoided at all the touch-points with all stakeholders especially with customers by both the front-liners as well as the rear-end officers. (Reference 'world of Kaizen' book).

What is a customer's rightful 'expect'ation after a typical complaint (that hardly 4% of the dissatisfied customers choose to make):

1/ First of all the first-aid so that s/he gets quick relief. (In addition, apology is anyway expected but it's of no use without the First-aid.)

2/ Right to know specific details of what exact action was taken to prevent the situation from occurring in future.

How does a typical supplier respond. What INDIFFERENCE do most suppliers engage into:

1/ First of all they deny the complaint then they defend.

2/ They express dry apology without taking preventive action. Such an apology is like rubbing the wound. (The taxi service in above case fell in this category.)

3/ They don't keep customer informed about specific details of what exact action (if at all) was taken to prevent the situation.

4/ They expect customers to forget service-errors s/he had faced during the year in lieu of a yearly-gift-packet and/or sweets. While the gift 'dry-of-emotions' reinforces their vow to quit, most customers shamelessly accept it in exchange of an unexpressed abuse (to the supplier).

Funnily, a typical supplier doesn't mind recruiting a well-paid customer-care officer who is well-trained in handling an errate customer, and further training him in writing flowery letters so that 'issues' are taken 'care' of.

Result:  Customer continues the service provider only until s/he finds another option so that s/he can QUIT. Meanwhile, s/he plays the role of a devil-publicity-officer 'bad-mouth'ing the supplier's services among not less than a dozen prospective customers.

As someone says, it takes 10 times more money and efforts to acquire a new customer.

Isn't it wiser instead to invest this money in training associates on what the customer 'expects' rather than spending wastefully on reactively 'managing' the effects of indifference.

Should a customer bother about such 'small' issues?:

If s/he wants a change in such careless attitude, then yes!

S/he must play her small-bit-a-role though. Else, s/he should not blame suppliers for shoddy quality of service. S/he must help to get service-error out of the system which otherwise anyway will keep popping up above the carpet exactly when unwanted.

If and when it eventually does pop-up then the corresponding customer got what s/he deserved. Also s/he makes herself deserving to what s/he will get in future.

That's how some business partnerships work

Take-care Take-care 

Free-pack could be a Curse-pack Dear customer

That you may murmur later

These Maiku (My Haiku) poetic lines got shaped while I was on a flight.

Seat pocket in front of me was stuffed with reading material and 'offers-on-board' for 'captive target market'.

Here is a picture of one of that about 'business partnerships' and that of an 'air-pillow' kind of pack received free-of-cost (courtesy a partner). It was a delight.

I photographed them both ignoring embarrassing look by my co-passenger. That's how I behave: an idiosyncratic fellow taking odd pictures such as around even a wash-basin, catching 'innovative styles' of someone blowing nose.

My so-called delight was short-lived as I found only four biscuits inside, against expectations that the inflated 'air-pillow' size pack seemed to raise. The innovative shape of the biscuits made them 'look bigger' that actually were 'smaller in weight'. 

The pack itself was a 'bag full of gas': A near-empty ppromise! 

Isn't it too much that a miser customer like me expects on a budget-airline. No wonder that the co-passenger was embarrassed.

Anyway, coming back to business of this blog-post, that's how some business partnerships work if not most.

The other day someone asked my opinion on an offer that came his way: "Indigo diesel available for 2.5 lacs. 2012-model."

I told him what an old car dealer often suggests. Price may be good but mechanic should check out engine condition. Check if it's an accident-car (changed-color remark on RC book is one clue); Kilometers ran (check if the dial is changed); Single-owner (and a known owner is good); Clear papers, etc.

My friend appeared insistent: "It is available from Maruti's second-hand dealer. So the offer should be reliable."

I shared with him my learning "from reliable sources" that there do exist 'partnerships' as a part of a typical 'business strategy'. Sometimes they are in the interest of customer. Sometimes they are Cozy-Nexus solely in the interest of the supply-chain itself as in following example:

- A typical 'second-hand-dealer' (let's call him a SCD), for instance, has an arm's length connection with a 'new-car-dealer' (let's call him a NCD) who makes an 'exchange offer'.

- NCD sends a valuer of SCD while offering a test-drive of a new vehicle.

- After exchange-deal is through, the SCD takes away old car and sells it on demand-supply criterion or with a mark-up of 30% margin whichever is higher. 

- So both the SCD as well as NCD do have vested interests in trying to push through the respective deals. Rightly so for them although not for customer! They are in business!!

In such cases the marketeer tends to oversell. But a prospective customer should behave business-like when s/he comes across an 'attractive-offer' like "Indigo diesel available for 2.5 lacs. 2012-model". After all her money is 'hard-earned'.  

The old-car dealer's suggestions referred earlier need to be viewed in light of this. That's also a reason why a single owner, a known owner as a direct-seller (without a middle-man) in-for a 'distress-sale' is more likely to be a good value-deal. Provided of course a reliable mechanic certifies condition even if it means paying his fees to inspect for 'some strings attached', if any.

Is it a value-deal then you need to ask every-time someone claims it to be a 'Unique-offer'?

Is it a value-deal when you go to buy biscuits that 'look-bigger'? or
Is it a short-term value on offer when so-called 'partners' offer you something FOC (free-of-cost) with a pack that looks disproportionately bigger? Are there any strings attached to the offer? or
Is it a value-deal when a telephone subscriber gets a movie-ticket free if s/he buys one on Tuesdays?

Is it a value-deal when you get 'Buy-2-Get-3' kind of free-offers?

Sometimes yes! Other-times no!!