Category Archives: Popular

Helping Employees Improve

One aspect of managing people is to provide positive feedback and show appreciation. Doing so is important. People benefit from encouragement and reinforcement. In addition to just telling them, take action to show your appreciation.

The Dilbert workplace is alive and well. And even in above average management systems there is plenty of resistance faced by those looking to improve systems. For those employees that are making the attempt to improve the organization go beyond saying thanks: actually demonstrate your appreciation. Do what you can to help them achieve.

A manager should be enabling their employees to perform. That means taking positive steps that help them perform. This is even more appreciated than saying thanks. And has the added benefit of helping the organization by helping along their good idea. It is win, win, win. They win, you win and the organization wins.

Thoughts on: Rewards and Recognition

Related: Keeping Good EmployeesRespect for People Requires Understanding PsychologyPeople are Our Most Important AssetMotivationIncentive Programs are Ineffective

Creating Customers For Life

How These Businesses Made Me A Customer For Life

So I walked out of Ray’s that day with a great deal and everything that I needed to get started. Since then, I have made every single sewing related purchase possible from their store. In some cases, I have gone way out of my way to drive there (it takes 20 minutes) just to pick up some spools of thread. I have also referred them to all of my friends. As far as I’m concerned, there are no other sewing dealers that I’m willing to deal with other than Ray’s.

I can speak so highly about these businesses because I’m extremely passionate about what they have to offer. Can you extract this kind of loyalty with your small business? You bet you can. Just think about the places and businesses that you are loyal to and replicate what they do. What sets your business apart from the competition? What can you do to provide lasting value? Keep a tally of these attributes, focus on the long run and you’ll be on the right path.

I love how easy it is to deal with Amazon. I’ll use them unless they don’t have an item. Shopping at Trader Joe’s is odd. The workers actually seem like they like that they have customers. And seem as though they want to do what they can to please customers. You wouldn’t think this would be an odd trait if you read about management in a book and never actually went to stores. But I find almost few retail employees see happy provide customer service.

Related: Ritz Carlton and Home Depot contrast in customer serviceGood Customer Service ExampleSeven Steps to Remarkable Customer ServicePaying New Employees to QuitCustomer Service is Important

Eric Schmidt on Management at Google

Eric Schmidt speaks at the Management Lab Summit on May 29, 2008 in Half Moon Bay, California. Conversation with Professor Gary Hamel.

  • “The culture can be thought of as a ship and iterate culture with transparency for what people are doing. And that model scales pretty well.”
  • “I have two jobs, two roles. The first is to make sure every issue that is important is really debated to find, not the common outcome, but the best decision… second thing is to put pressure to make it happen quick.”
  • “it [managing better] starts with listening, it has to do with curiosity
  • “everything has to be based on some fact”
  • “It’s only about the people.” [respect for people is critical, Google really acts as though the people are their most important asset – John].
  • “What is the number 1 goal of the company? It is end user happiness with search. What is the number 2 goal? It’s end user happiness with advertising. What is the number 3 goal? The construction of the Google network of partners to effectuate the first two. What is the number 4 goal? To grow and scale the business… You will eventually get extraordinary returns for your shareholders and maximize advertiser happiness if all those things happen… There are a lot of business executives that get confused on what the goal is and they think that shareholder value is the goal. Shareholder value is a consequence of the goal.”

Related: Eric Schmidt Podcast on Google Innovation and EntrepreneurshipInterview with Google CEO Eric SchmidtInnovation at GoogleGoogle: Experiment Quickly and OftenMarissa Mayer Webcast on Google InnovationGoogle Management by Gary HamelLarry Page and Sergey Brin Interview Webcast

Toyota Execution Not Close to Being Copied

The Open Secret of Success

Toyota’s innovations, by contrast, have [focused] on process rather than on product, on the factory floor rather than on the showroom. That has made those innovations hard to see. But it hasn’t made them any less powerful.

At the core of the company’s success is the Toyota Production System, which took shape in the years after the Second World War, when Japan was literally rebuilding itself, and capital and equipment were hard to come by. A Toyota engineer named Taiichi Ohno turned necessity into virtue, coming up with a system to get as much as possible out of every part, every machine, and every worker. The principles were simple, even obvious – do away with waste, have parts arrive precisely when workers need them, fix problems as soon as they arise. And they weren’t even entirely new – Ohno himself cited Henry Ford and American supermarkets as inspirations. But what Toyota has done, better than any other manufacturing company, is turn principle into practice. In some cases, it has done so with inventions, like the andon cord, which any worker can pull to stop the assembly line if he notices a problem, or kanban, a card system that allows workers to signal when new parts are needed.

Very true, except one thing. Toyota’s innovation is not limited to process and execution. Toyota’s long term vision results in very dramatic innovation (that granted is not getting the press today – check back in 20 years, I think you will be reading about it then). For some examples see: Toyota’s Partner Robot, Toyota as Homebuilder, Toyota Engineers a New Plant: the Living Kind and The Birth of Prius.

A company truly driven by a focus on continual improvement, respect for all employees and reasonable executive compensation might be a company serious about adopting Deming and Toyota management principles. It is hard for me to imagine such a situation that doesn’t truly seek, as the primary aim of the organization, to benefit many stakeholders (workers, owners, suppliers, customers…) not just executives (or just executives, board and owners…).

Related: Toyota Management Develops the New CamryBetter and DifferentDeming and ToyotaToyota Keeps ImprovingMore Positive Press for Toyota ManagementGood Execution is Important

Creating Jobs

Do Lean Companies Create Fewer Jobs?

No, they create more. If you assume the lean company grows sales at the same rate as some poorly management company then it may well be that the lean company creates fewer jobs. However that is not a valid assumption. Deming provided the reason in his presentations to Japan in the 1950’s with his chain reaction. From page 3 of Out of the Crisis

  • Improve Quality —>
  • Costs decrease because of less rework, fewer mistakes, fewer delays, snags, better use of machine-time and materials —>
  • Productivity Improves —>
  • Capture the market with better quality and lower price —>
  • Stay in Business —>
  • Provide jobs and more jobs

For an example of this process at work see GM, Ford and Toyota. Toyota defines lean (Toyota’s management system is what was called lean manufacturing by Jim Womack and Dan Jones). Toyota continues to add employees while Ford and GM have been shedding jobs.

It is true, for lean (and un-lean) companies alike, productivity is improving (it just improves more at lean companies) which means that fewer people are needed to produce the same amount as we have in the past. We have posted previously about the mistaken belief that jobs are moving overseas.
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Deming Companies

I get asked for examples of Deming managed companies fairly often. And recently I have had a number of such requests. So I figured I would provide an answer as a blog post. First, Dr. Deming would respond to such questions by referring to the theory of knowledge and the fallacy of trying to learn via examples. So remember to read up on why learning from examples is dangerous before taking to much from this.

I see Toyota as the best example of a Deming company. Dr. Deming did not propose a cookbook to follow. Instead he proposed a theory that requires learning and application within the specific institution. Toyota has created a management system that is based on Dr. Deming’s ideas and then they have evolved that over 60 years into something that is consistent with Deming’s management philosophy and has new ideas Deming did not mention. As odd as it may sound that very act of developing new concepts that were not mentioned by Dr. Deming is exactly what makes them the company that most exemplifies Deming’s management system.

Other companies that have also done a great job applying his ideas. Peaker Services has done great things. Ian Bradbury is the President and a friend. He spoke at a seminar I co-presented and I included links to a couple documents of his in a blog post. He worked at GM Power System when Dr. Deming was working with GM. Richard R. Steele founder and also serves on the Deming Institute board of trustees.

Hillerich & Bradsby Company has been following Dr. Deming’s ideas since 1984. John A. Hillerich is President and Chairman of the Board of Hillerich & Bradsby Company and serves on the Deming Institute board of trustees. The companies brands include: Louisville Slugger and Powerbuilt.

A couple of good books explore companies adopting Dr. Deming’s ideas: Free, Perfect and Now by Robert Rodin (a great book by the CEO of Marshall Industries), highly recommended). Unfortunately the company was bought by a larger company and I do not believe the Deming philosophy is alive and well (but I could be wrong). Always Think Big by Jim McIngvale is by the CEO. Mattress Mack: One man, one store, one of a kind.

Omnilingua has had amazing success applying Dr. Deming’s idea and I am proud to call Eric Christiansen their president a friend. Lean Blog Podcast with Eric Christiansen “A Deming Company”. In a previous post I recapped another example: Dr. Deming’s Ideas at Markey’s Audio Visual.

Companies awarded the Deming prize can also provide good examples. Four subsidiaries of the Rane Group in India has received awards in the last few years. Numerous people have done great things within companies – creating pockets of Deming practice. Some great examples include Steven Prevette – see some of his articles on Deming. David Anderson has incorporated Deming ideas within Microsoft and then Corbis – see his Agile Management Blog. William Bellows has a long term effort at Boeing’s Rocketdyne Propulsion & Power business unit. They offer conference call study sessions on Deming’s ideas for those within Boeing and also allow outside participation. He is also a member of the Deming Institute board of trustees.

This is just off the top of my head so I am sure I have left off many good examples. Also, for me the company needs to have an understanding what they are doing evolved from Dr. Deming’s ideas to list them (many companies have practices which are Deming based but they do not have an appreciation for Deming’s system of management – I think that appreciation is needed to be a “Deming company”). Many companies that truly and deeply practice lean manufacturing are applying many of Deming’s ideas. However to me if they do not understand the roots of the ideas from Dr. Deming I don’t consider that a “Deming company.” But that label is not all that meaningful anyway – so this just explains my thinking.

Feel free to add your suggestions in the comments.

Related: The Purpose of an OrganizationDeming management blog posts

Arbitrary Rules Don’t Work

Photo showing evidence of people ignoring gate

Procedurally Enforcing Workflow by Michael Salamon:

UI gem, and a great reminder for the RIAA/MPAA:

You can’t force people to follow directions they deem arbitrary.

I bet if that gate spit out $100 bills people would use it.

Why matters. You can’t just expect people to act in a way that seems arbitrary. As I stated in Poka-Yoke Assembly, Do you Read Instructions Carefully Before Assembly? Nope, I don’t. I expect I can make a quick judgment if I really need to or I basically get it and can put things together well enough. I expect the supplier to make very obvious anything critical. It is not ok to expect people to think the way you want them to. You have to understand how people will react and create solutions based on that.

We have discussed similar ideas: Why Isn’t Work Standard?Visual Work InstructionsVisual Instructions ExampleEuropean Blackout: Human Error-NotFind the Root Cause Instead of the Person to Blame

A similar example I learned long ago. Many schools try to force students not to walk on the lawn and create ugly paths through the grass. A smart alternative. Wait for the students to wear a path. Then pave that. If you are frustrated because people won’t follow your rules your rules are probably bad. Fix the rules (or procedures…). Don’t expect telling people in a loud voice (or stern memo or…) that they must follow your rules.

Great Marissa Mayer Webcast on Google Innovation

Marissa Mayer speech at Stanford on innovation at Google (23 minutes, 26 minutes question and answers). She leads the product management efforts on Google’s search products- web search, images, groups, news, Froogle, the Google Toolbar, Google Desktop, Google Labs, and more. She joined Google in 1999 as Google’s first female engineer. Excellent speech. Highly recommended. 9 ideas:

(inside these are Marissa’s comments) [inside these are my comments]

  1. Ideas come from anywhere (engineers, customers, managers, executives, external companies – that Google acquires)
  2. Share everything you can (very open culture)
  3. You’re Brilliant. We’re Hiring [Google Hiring]
  4. A license to pursue dreams (Google 20% time)
  5. Innovation not instant perfection (iteration – experiment quickly and often)
  6. Data is apolitical [Data Based Decision Making – this is true but as an operating principle requires people that really understand data. See: Data can’t lie.
  7. Creativity loves Constraints [process improvement and innovation]
  8. Users not money [the opposite of what business school’s teach business case]
  9. Don’t kill projects morph them

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Bad Management Results in Layoffs

In response to Is Laying People off Really Anti-Lean?:

Let’s say you, a Lean enthusiast, are named CEO of a mid sized manufacturing company. Let’s also assume your market has turned down and the constraint is clearly the market. Let’s also assume you need to improve operating income above all else. The final assumption is the company you inherited is not even good at mass production. They just stink at everything.

If you come into this situation and realize that you can implement some basic lean and six sigma principles and only need half the workforce to meet customer demand what do you do?

Layoffs are a failure of management. If the company has not been executing a long term strategy to respect people and manage the system to continually improve, manage for the long term, working with suppliers… it might be they have created an impossibly failed organization that cannot succeed in its current form. And so yes it might be possible that layoffs are required.

It is very easy to jump to layoffs as the “answer” though. While it is possible to construct a situation in which they make sense that such a hypothetical situation it rarely is the case that an organization is committed to lean and then makes layoffs. Instead they just think the same old way and mention the word lean since they see others doing it and layoff sounds like it is lean to someone that doesn’t know the first thing about lean thinking.

I would not see, “a focus on improving operating income above all else” as a lean way of thinking. Improving that is one focus among many that are needed to achieve long term success.

Does that mean a organization doing a great job of managing in a truly lean way may not find itself in a position where layoffs are necessary? No. Failing to predict and execute may have consequences and those may include layoffs. In your example things are confused a bit by separating the responsibility of getting into the mess from what to do next. Definitely, riding out a few poor quarters would be preferable. I have absolutely no question about that.
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Illusions – Optical and Other

Checkerbox Graphic If the output for working for the year is a square. And the job is to produce dark squares who do you pay more A or B? Of course it is a trick question, the squares are the same color. But it doesn’t look that way at first does it? Optical illusions provide evidence that you cannot always trust what seems obvious.

Dr. Deming’s red bead experiment provides some additional insight into the idea that our management systems often use “evidence” to support our believes when in fact the “evidence” does not mean what we think it does. Dr. Deming included the theory of knowledge (how do we know what we know) as one of the four areas of his management system. It is the areas of his work that is least appreciated and understood by managers today. Optical illusions provide a simple reminder of how easily we can think we know things that are not so.

Just as Toyota is always dissatisfied and looking for how to improve, it is important to question what you believe. Even when it is as obvious as the A square being darker than the B square. Understanding the ease with which we can reach false conclusions can be a powerful aid in improving management decision making.

Related: The Illusion of UnderstandingChange is not ImprovementPerformance Appraisal ProblemsDr. Deming on Performance Appraisal: “The fact is that the system that people work in and the interaction with people may account for 90 or 95 percent of performance” (from the introduction to the Team Handbook) – It is a mistake to think improving the figures is the goal

Optical illusion by Edward H. Adelson

Top 10 Manufacturing Countries

The newest data from the UN confirms most of the recent trends in manufacturing output – most notably that China continues to grow dramatically. The data also shows a stagnation in USA manufacturing output over the last several years, though the USA remains by far the largest manufacturer. The most significant news from this latest data, I believe, is that that manufacturing output growth in the USA has been slower than global manufacturing output growth from 2002-2005. This was not the case prior to 2002. I will be writing more on this data in the Curious Cat Investing and Economics Blog. UN Data, in billions of current US dollars:

Country 1990 1995 2000 2001 2002 2003 2004 2005
USA 1,040 1,289 1,543 1,460 1,471 1,488 1,545 1,493
Japan 809 1,217 1,033 857 807 886 962 964
China 143 299 484 527 573 664 788 895
Germany 437 517 392 389 407 490 566 594
United Kingdom 207 221 230 218 222 239 283 no data
Italy 240 226 206 205 218 259 295 291
France 200 233 190 185 192 228 256 253
Korea 200 233 190 185 192 228 256 253
Canada 92 100 129 119 120 149 170 196
Brazil 117 149 120 102 95 109 130 171
Spain 108 107 98 100 108 134 153 160
Mexico 50 55 107 110 111 104 111 122
Russia 201 104 73 77 54 64 92 117
India 50 60 67 68 72 84 100 116

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USA Healthcare Costs Now 16% of GDP

U.S. Health Spending Estimates:

Health care spending growth in the United States slowed for the third consecutive year in 2005, increasing 6.9 percent compared to 7.2 percent growth in 2004 and 8.1 percent in 2003, the Centers for Medicare & Medicaid services (CMS) reported today.

The 6.9 percent growth in 2005 marks the slowest rate of growth in health spending since 1999, when growth was 6.2 percent. Health care spending reached almost $2.0 trillion in 2005, or $6,697 per person, up from $6,322 per person in 2004.

So the rate at which healthcare spending continues to increase is decreasing. That is better than increasing at an increasing rate. However, it is already a huge drag on the economy and the need is for the expenditures to actually decrease (not slow down the rate of increase) and for performance to improve. There are good things being done but much more is needed. Health care costs are a huge cost for companies.

Health Care Spending in the United States and OECD Countries

This growing gap between health spending in the U.S. and that of other developed countries may encourage policymakers to look more closely at what people in the U.S. are getting for their far higher and faster growing spending on health care.

Related: USA Health Care Costs reach 15.3% of GDP – the highest percentage ever (2 years ago)Health care spending rose at twice the rate of inflation in ’05Health Care Costs Approach $2 TrillionExcessive Health Care Costs article directoryBill takes on prescription costs

What Could we do Better?

At the Hunter Conference, years ago, a speaker (I forget who) talked about how to get useful feedback. He discussed how asking “how is everything” normally will get the response: “fine” (which is often that is exactly what the staff wants so they can move on without wasting any time). However, if you really want to improve that doesn’t help.

He explained how he worked with Disney to improve their restaurants. Using the “how is everything” question had not alerted the restaurant to any issues. So he visited the tables with the manager and asked – “What one thing could we do to improve?” Over 50% of the people said the rolls were stale: clear information that is actionable. And in fact they were able to adjust the system to remove that problem. A small thing, in this case, but a clear example of a good method to help target improvement.

To encourage useful feedback, specifically give the customer permission to mention something that could be improved. What one thing could we do better?

This post was sparked by Seth’s post: This must be hard. I think he was on the right track, but I think the results could be even better using a question like: what one thing could we do better?

Related: Usability FailuresCEO Flight Attendantcustomer focus blog posts

Amazon Innovation

Jeff Bezos’ Risky Bet

And, he hopes, making money. With its Simple Storage Service, or S3, Amazon charges 15 cents per gigabyte per month for businesses to store data and programs on Amazon’s vast array of disk drives. It’s also charging other merchants about 45 cents a square foot per month for real space in its warehouses. Through its Elastic Compute Cloud service, or EC2, it’s renting out computing power, starting at 10 cents an hour for the equivalent of a basic server computer. And it has set up a semi-automated global marketplace for online piecework, such as transcribing snippets of podcasts, called Amazon Mechanical Turk. Amazon takes a 10% commission on those jobs.

In my view Amazon is doing some very interesting innovation. As with most true innovation it is not easy to understand if it will succeed or not. I believe Amazon uses technology very well. They have done many innovative things. They have been less successful at turning their technology into big profits. But I continue to believe they have a good shot at doing so going forward (and their core business is doing very well I think). Innovation often involves taking risks. Bezos is willing to do so and willing to pursue his beliefs even if many question those beliefs. That means he has the potential to truly innovate, and also means he has to potential to fail dramatically.

Related: Bezos on Lean ThinkingMaking Changes and Taking Risks10 Stocks for 10 Years UpdateA9 Toolbar for Firefox Browser
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Hiring the Right Workers

The job market is an inefficient market. There are many reasons for this including relying on specification (this job requires a BS in Computer Science – no Bill Gates you don’t meet the spec) instead of understanding the system. Insisting on managing by the numbers even when the most important figures are unknown and maybe unknowable. Using HR to find the right person to work in a process they don’t understand (which reinforces the desire to focus on specifications instead of a more nuanced approach). The inflexibility of companies: so if a great person wants to work 32 hours a week – too bad we can’t hire them. And on and on.

At first I titled this post the Hiring Process but that creates a analytic view of the hiring process separated from the important part which is workers actually working. The hiring process just provides resources that are needed. But in many places it is the reverse, the hiring process provides resources and then the rest of the process deals with that output as best it can.

Seth Godin had a very good post recently, The end of the job interview:
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Toyota IT Overview

What’s Driving Toyota? by Mel Duvall is an interesting, long article discussing Toyota overall and focusing on Toyota’s Information Technology systems.

Technology does not drive business processes at Toyota. The Toyota Production System does. However, technology plays a critical role by supporting, enabling and bringing to life on a mass scale the processes derived by adhering to TPS.

“What strikes me about Toyota is, if you were to ask them if they have a technology strategy, they would probably say no, we have a business strategy,” says Philip Evans, a senior vice president at the Boston Consulting Group who has studied Toyota. “They have a very clear understanding of the role technology plays in supporting the business.”

This is such a simple point but so hard for many to truly adopt. IT is a support function. IT is a means to an end.

As with almost all of its technology implementations, Toyota started small, carefully rolling out the portal to its Lexus dealers as a test. While it worked out the bugs, it continually expanded the offering, eventually making it available to all 1,200 of its U.S. Lexus and Toyota dealers.

Great way to deploy software: nice use of PDSA methodology.

Related posts: Toyota IT for KaizenPlanet KaizenToyota Robotsmanagement blog posts on information technology
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Gladwell (and Drucker) on Pensions

The Risk Pool by Malcolm Gladwell (author of The Tipping Point and Blink):

The most influential management theorist of the twentieth century was Peter Drucker, who, in 1950, wrote an extraordinarily prescient article for Harper’s entitled “The Mirage of Pensions.” It ought to be reprinted for every steelworker, airline mechanic, and autoworker who is worried about his retirement. Drucker simply couldn’t see how the pension plans on the table at companies like G.M. could ever work. “For such a plan to give real security, the financial strength of the company and its economic success must be reasonably secure for the next forty years,” Drucker wrote. “But is there any one company or any one industry whose future can be predicted with certainty for even ten years ahead?” He concluded, “The recent pension plans thus offer no more security against the big bad wolf of old age than the little piggy’s house of straw.”

Pension plans did work well for a short period of time. But recently they (along with the attached retiree health care) are one of the big problems facing large old companies: like GM. Gladwell talks about the dependency ratio for an economy and the dependency ratio of companies. Worsening dependency ratios can cause pension plans to kill companies (if they are not funded when the obligation is incurred) – as the company is forced to pay for more and more retirees with fewer and fewer workers.
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Eliminate Slogans

De-motivation Poster

This poster may do a better job, than my posts, of showing why posters and slogan are not an effective management strategy. Text from the poster: “If a pretty poster and a cute saying are all it takes to motivate you, you probably have a very easy job. The kind robots will be doing soon.”

Despair (link to the motivation poster shown here), offers many such de-motivational posters and note cards – well done satire, in my opinion, but they might be too much for some.

Along the lines of our post, Stop Demotivating Employees, the founder of Despair wrote a book entitled: The Art of Demotivation.

Another poster example: Ambition – The journey of a thousand miles sometimes ends very, very badly.

One of Deming’s 14 obligations of management was to eliminate slogans.

Also see:

Related: Why Extrinsic Motivation FailsDangers of Extrinsic MotivationAlfie Kohn has some great books and articles on the problems with extrinsic motivation

New Rules for Management? No!

Fortune recently published an article talking about the “new rules” for management using Jack Welch (GE six sigma) as the focus of the old rules. It seems to me there is nothing new here (once again).

“New” rule: “Agile is best, being big can bite you”
Yeah. Does anyone think this is new. Do they really believe Jack Welch thought agile was not a good thing? Yes, Jack Welch wanted to be number 1 or number 2 in the field or get out of that business line. I still don’t think that he thought being a big un-agile organization couldn’t hurt you.

“New” rule: “Find a niche, create something new.”
Yeah, good idea. I seriously doubt GE was against creating new things. Finding niches in fact is basically what being number 1 or 2 is about. Find those niches you excel in and focus there. I think saying you have to be number 1 or 2 is a silly arbitrary target. But that was just as true 10 years ago as today. Lets look at who the article for these new ideas quotes (with big photos on the main page): Starbucks – number 1 coffee shops, Xerox (I don’t know), Cisco – number 1 switches/routers, Coke number 1 sugar water sellers. Boy this old idea of number 1 or 2 is sure old thinking. Why are those highlighted as experts all perfectly suited to the old rule?
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Quality and Innovation

I think the The Quality Movement Vs. The Innovation Movement by Bruce Nussbaum makes a mistake in calling the innovation movement separate from the quality movement.

Wow. It makes sense. The father of quality, of course, was Dr. W. Edwards Demming, and he preached for a very long time before he was really heard. In fact, as I recall, Japanese companies first accepted Demmings teachings long before U.S. and European corporations.

Lets quote Deming on innovation from New Economics, page 10:

No defects, no jobs. Absence of defects does not necessarily build business… Something more is required.

What is required? Innovation.
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