Last week, I was one of the analysts at EMC World. This is EMC's big event for customers, press and analysts; they get to see the current EMC product line and get updates from a number of top executives.
I had a one-on-one meeting with Jim Bampos, who heads the company's executive quality effort. This effort is unique in my experience because it reports to the CEO and because its end goal is not some difficult-to-measure aspect of product quality. It's customer loyalty.
I've followed this subject in various ways for some time. I first became interested in the subject of quality after reading the book "Zen and the Art of Motorcycle Maintenance" in my teens. The book served as an early primer on the subject. I was later tied for a while to quality at IBM years ago. Let's talk about quality and why I think EMC may actually have something interesting in its approach.
Quality: Whose Job Is It?
There was another book that I believe was called Japan Inc. (interestingly enough there is a comic book by the same name now) that was on my reading list back in graduate school. This book talked about the difference between U.S. and Japanese automakers. One big difference at the time was that individuals owned quality in Japan and departments were responsible for it in the U.S. The book theorized that it was this personal ownership for quality, with the end product connected to the personal image of those who built it, that was causing cars from Japan to be far more reliable than their counterparts in the U.S.
At Apple, as documented in the book "Inside Steve's Brain," Steve Jobs himself largely owns quality and customers write him regularly (he evidently responds) when they have quality issues. His personal focus on quality has generally lead to the belief, which is helping fuel Apple's growth, that Apple products are better than most of what the company competes with. He doesn't build anything; he is a proxy for the customer and assures that the real customer does not receive a product that isn't up to Steve Jobs' very high quality standards.
This suggests that people that build products need to take personal pride in them and that there needs to be someone inside the company that reports up to the CEO to assure quality standards are set to customer levels. But what is the measurement?
Quality Equals Better Customer Retention
Until I attended the EMC meeting, I actually never connected the dots all the way through to the real benefit of having a high-quality product. I'd thought of it in terms of keeping support costs down and customer satisfaction scores up. But the second part of this, customer satisfaction, sounds like a "nice to have," not a critical need. I think that is why, when I was working at IBM, the division I was in killed the quality department; they saw it as largely redundant, expensive and unnecessary. I also think it is why Sony, which actually builds very high-quality products, doesn't correct its incredibly low customer satisfaction perception. They just don't think it is worth the effort.
But customer satisfaction is the basis for loyal customers and Apple and Toyota have some of the most loyal customers on the planet (one of the reasons Toyota passed General Motors as the largest worldwide manufacturer of cars, I think). It costs a lot of money to acquire a customer and if you can avoid a repeat of that acquisition cost, you should dramatically improve your bottom line.
Just as important is that happy customers tend to be strong references for new customers, which again reduces that customer acquisition cost dramatically. This suggests that a strong quality effort will eventually create significant margin improvements -- if the effort doesn't itself become too expensive.
EMC's New Quality Program
Reporting up through the office of the CEO and using customer retention, not quality alone, as the primary metric for success, EMC is experimenting with what may be the most powerful quality program in the technology market. Potentially even better than the Jobs-based program at Apple (because it doesn't rely so heavily on one person and can scale), this program jumps to one of the primary benefits of good quality and measures itself through that.
I'm a big fan of placing metrics close to the real benefit of any activity because that makes it vastly more difficult to harm the company by gaming the system. In addition, in this instance, separating the creation of a product from the group measuring its quality is consistent with the accounting principle of separation of duties. I believe that too is critical to ensuring that quality doesn't become subordinated while meeting a line manager's performance objectives (basically being bypassed to get an inferior product to market quickly).
The only thing I could think of that might make this program more powerful would be to add the metric of customer reference, given that this is also a key benefit for a high-quality product. In the end, and the reason I'm writing about this, I hope other companies emulate what EMC is doing; that would likely improve quality throughout the technology market.