Part 1

The Foundations of Quality

2 Implementing Six Sigma and Lean

Introduction to Chapters 13
Part 1 of the book deals with some of the fundamentals of quality. The per-
ception of quality varies significantly depending on the type of industry,
economy and culture. However it is undeniable that in todays global econ-
omy quality forms an integral part of the business, and the differences in its
perception from the points of view of both the suppliers and customers are
gradually converging. The following topics are examined in this section:

Chapter 1: Quality and operational excellence

Chapter 2: History of the quality movement
Chapter 3: The scope of tools and techniques

Chapter 1 addresses the dimensions of quality and emphasises that prima-

rily the sustainability of quality can lead to operational excellence. Tools and
techniques are essential aides in the road map to excellence.
Quality gurus, in particular Deming, Juran, Crosby, Feigenbaum, Taguchi
and Ishikawa have had a significant influence in the development of the qual-
ity movement throughout the world and their learning and ideas are summa-
rised in Chapter 2.
Chapter 3 examines the driving forces and opposing forces contributing to
the success or failures of a quality programme in general and the application
of tools and techniques in particular.
1
Quality and operational
excellence

We are what we repeatedly do. Excellence, then, is not an act

but a habit
Aristotle

Introduction
The methodology of implementing a quality management and improvement
programme can be varied. The programme is likely to have a different name
or label, such as TQM (Total Quality Management), Six Sigma, Lean Sigma,
BPR (Business Process Re-engineering) or Operational Excellence. Regardless
of the methodology or name of the continuous improvement programmes,
each organisation and programme team will certainly need to use a selection or
tools and techniques in their implementation process. Most of these tools and
techniques are simple to understand and can be used by a large population of
the company. However, there are also some techniques which are more com-
plex. These advanced techniques are used by specialists for specific problem
solving applications. It is vital that the tools and techniques are selected for the
appropriate team and applied correctly to the appropriate process. Therefore
the fundamental requirements for achieving repeatable and reliable results by
these tools and techniques is a clear understanding, both of the tools and tech-
niques themselves and the process by which they could be applied.
The objective of this chapter is to introduce to the reader the following
areas:

What are the tools and techniques

The concept of quality and operational excellence.

Tools and techniques

In general, tools and techniques can be broadly defined as the practical methods
and skills applied to specific activities to enable improvement. A specific tool
4 Implementing Six Sigma and Lean

has a defined role and a technique may comprise the application of several
such tools.
Dale and McQuater (1998) have suggested the following definition of tools
and techniques.

Tools and techniques

A single tool may be described as a device which has a clear role and
defined application. It is often narrow in its focus and can be and is usu-
ally used on its own. Examples of tools are:

Cause and Effect Diagram

Pareto Analysis
Relationship Diagram
Control Chart
Histogram
Flow Chart

A technique, on the other hand, has a wider application than a tool. There
is also a need for a greater intellectual thought process and more skill,
knowledge, understanding and training in order to use them effectively.
A technique may even be viewed as a collection of tools. For example,
Statistical Process Control employs a variety of the tools, such as graphs,
charts, histograms and capability studies, as well as other statistical methods,
all of which are necessary for the effective deployment of a technique. The
use of a technique may cause the necessity for a tool to be identified.
Examples of techniques are:

Statistical Process Control

Benchmarking
Quality Function Deployment
Failure Mode and Effects Analysis
Design of Experiments
Self-assessment

Source: Dale and McQuater (1998).

What is quality?
If you were to ask quality experts to define quality, it is likely that you would
receive many different answers, although you would elicit a set of common or
comparable themes, such as Fitness for purpose, Right first time, What the
 Quality and operational excellence 5

customer wants, Conformance to standards, Value for money, Right thing

at the right time and so on. A basic reason for differing perceptions of quality
is arguably that each person has their own set of individual preferences.
A simple story from the Indian fables may illustrate the above point. Three
blind men went to visit an elephant and each felt the creature to form an
impression of it. On their way back, they discussed the experience. The first
man said, The elephant is just like a swinging fan. The second blind man
replied, No, I disagree. I think that it is more like a pillar. Then the third
person protested, Youre both wrong. I would describe it as being more like a
huge, thick whip. He added, I am absolutely sure, its a long and very flexi-
ble object. It is clear from their very different impressions and viewpoints that
the three blind men were influenced by their varying attitudes and the way in
which they touched the elephant in order to arrive at such contrary perceptions
about the same animal. However, it was only by sharing their ideas that they
realised that they had visualised one concept in a variety of ways.
There are many different definitions and dimensions of quality to be found
in books and academic literature. We will present three of these definitions
selected from published literature and propose a three-dimensional definition
of quality to reflect the appropriate application of tools and techniques.
One of the most respected definitions of quality is given by the eight qual-
ity dimensions (see Table 1.1) developed by David Gravin of the Harvard
Business School (1984).

Table 1.1 Gravins product quality dimensions

Performance
Features
Reliability
Conformance
Durability
Serviceability
Aesthetics
Perceived quality

Performance refers to the efficiency (e.g. return on investment) with which

the product achieves its intended purpose.
Features are attributes that supplement the products basic performance, e.g.
tinted glass windows in a car.
Reliability refers to the capability of the product to perform consistently over
its life cycle.
Conformance refers to meeting the specifications of the product, usually
defined by numeric values.
Durability is the degree to which a product withstands stress without failure.
Serviceability is used to denote the ease of repair.
6 Implementing Six Sigma and Lean

Aesthetics are sensory characteristics such as a look, sound, taste and smell.
Perceived quality is based upon customer opinion.

The above dimensions of quality are not mutually exclusive, although they
relate primarily to the quality of the product. Neither they are exhaustive.
Service quality is perhaps even more difficult to define than product quality. A
set of service quality dimensions (see Table 1.2) that is widely cited has been
compiled by Parasuraman et al. (1984).

Table 1.2 Parasuraman et al.s service quality dimensions

Tangibles
Service reliability
Responsiveness
Assurance
Empathy
Availability
Timeliness
Professionalism
Completeness
Pleasantness

Tangibles are the physical appearance of the service facility and people.
Service reliability deals with the ability of the service provider to perform
dependably.
Responsiveness is the willingness of the service provider to be prompt in
delivering the service.
Assurance relates to the ability of the service provider to inspire trust and
confidence.
Empathy refers to the ability of the service provider to demonstrate care and
individual attention to the customer.
Availability is the ability to provide service at the right time and place.
Professionalism encompasses the impartial and ethical characteristics of the
service provider.
Timeliness refers to the delivery of service within the agreed lead time.
Completeness addresses the delivery of the order in full.
Pleasantness simply means the good manners and politeness of the service
provider.

Noriaki Kano (1996) demonstrates in the well-known Kano Model of cus-

tomer satisfaction (see also Appendix A7) that there are three attributes to
quality (viz. basic needs, performance needs and excitement needs) and that
to be competitive products and services must flawlessly execute all three
attributes of quality.
Our third authoritative definition of quality is taken from Ray Wilds
Operations Management (2002, p. 644) (see Table 1.3).
 Quality and operational excellence 7

Table 1.3 Wilds denition of quality

The quality of a product or service is the degree to which it satisfies customer
requirements.
It is influenced by:
Design quality : The degree to which the specification of the product or service
satisfies customers requirements.
Process quality : The degree to which the product or service, which is made
available to the customer, conforms to specification.

The list of quality dimensions by Gravin (1984) and Parasuraman et al.

(1985) are widely cited and respected. However, one problem with multiple
dimensions is that of communication and if allowed time, the reader could
probably identify additional dimensions. It is not easy to devise a strategic plan
on quality based on specific dimensions which could be interpreted differently
by different departments. Wilds definition of design/process quality however
provides a broad framework to develop a company specific quality strategy.
Nonetheless, one important dimension of quality is not clearly visible in
the above models: the quality of the organisation. This is a fundamental cor-
nerstone of the quality of a holistic process and an essential requirement of an
approved quality assessment scheme such as EFQM (European Foundation of
Quality Management).
Our three-dimensional model of quality is shown in diagrammatic form in
Figure 1.1.

Product Specifications
quality

Project
quality
Sustainable
Conformity culture
Process Organisation
quality quality

Figure 1.1 Three dimensions of quality ( Ron Basu).

When an organisation develops and defines its quality strategy, it is import-

ant to share a common definition of quality and each department within a
8 Implementing Six Sigma and Lean

company can work towards a common objective. The product quality should
contain defined attributes of both numeric specifications and perceived dimen-
sions. The process quality, whether it relates to manufacturing or service
operations, should also contain some defined criteria of acceptable service
level so that the conformity of the output can be validated against these cri-
teria. Perhaps the most important determinant of how we perceive sustainable
quality is the functional and holistic role we fulfil within the organisation. It is
only when an organisation begins to change its approach to a holistic culture
emphasising a single set of numbers based on transparent measurement with
senior management commitment that the organisation quality germinates. We
have compiled (see Table 1.4) a set of key organisation quality dimensions.

Table 1.4 Basus organisation quality dimensions

Top management commitment
Sales and operations planning
Single set of numbers
Using tools and techniques
Performance management
Knowledge management
Teamwork culture
Self-assessment

Top management commitment means that organisational quality cannot exist

without the total commitment of the top executive team.
Sales and operations planning is a monthly senior management review pro-
cess to align strategic objectives with operation tasks.
Single set of numbers provides the common business data for all functions in
the company.
Using tools and techniques relates to the fact that without the effective applica-
tion of tools and techniques, the speed of improvement will not be assured.
Performance management includes the selection, measurement, monitoring
and application of key performance Indicators.
Knowledge management includes education, training and development of
employees, sharing of best practice and communication media.
Teamwork culture requires that teamwork should be practised in cross-
functional teams to encourage a borderless organisation.
Self-assessment enables a regular health check of all aspects of the organisa-
tion against a checklist or accepted assessment process such as EFQM.

Hierarchy of quality
Our hierarchy of quality approximately follows the evolution of quality man-
agement from simple inspection to full quality management system as shown
in Figure 1.2.
 Quality and operational excellence 9

Inspection Quality control Quality assurance TQM

Checking work Self-inspection Develop quality Teamwork

after the event Quality planning systems Employee
Identify sources of and procedures Use of quality cost involvement
non-conformance Use of basic data Process
Take corrective statistics Quality planning management
action Quality manual Use of statistical Performance
Use of process process control measurement
performance data Involve non- Involves
operations functions  All functions
 Suppliers
 Customers

Figure 1.2 Hierarchy of quality.

(Source: Hill (2000); A similar approach is taken by Wright (1999),
chapter 10 (this chapter is reprinted in the Managing Performance
Readings).

Quality by inspection is an expensive method of achieving a basic level

of quality. It requires the employment of people to check on the operation.
Inspection and supervision do not add value to a product, they merely add to
the cost! However the inspection of results with specified requirements are
often necessary to ensure regulatory or approved standards.
Quality control (QC) is the next stage above quality inspection. The control
process is based on the statistical method which includes the phases of analy-
sis, relation and generalisation. Activities relating to QC include:

Monitoring Process Performance

Acceptance Sampling
Designing and Maintaining Control Charts.

Quality assurance (QA) relates to activities needed to provide adequate con-

fidence that an entity will fulfil requirements for quality. The first two stages,
inspection and control, are based on a detection approach and relate to after
the event, while QA is aimed at preventing mistakes. QA activities include:

Approved Supplier Scheme

Operator Training
Process Improvement.

Total quality management has been defined in ISO 8402, 1995, as the
Management approach of an organisation, centred on quality, based on the
participation of all its members and aiming at long-term success through
customer satisfaction, and benefits to all members of the organisation and
society. The holistic view of TQM supports the idea that quality is the respon-
sibility of all employees and not just quality managers. TQM encompasses
10 Implementing Six Sigma and Lean

all three dimensions of quality as shown in Figure 1.1, with particular empha-
sis on organisational quality.

Cost of quality
One frequently asked question about quality management is, Can you quan-
tify the benefits? The answer to this question is yes we can, albeit approxi-
mately. The benefits are quantified in terms of not having the right quality
or the cost of poor quality. As shown in Figure 1.3, cost of quality is derived

Total cost of
quality

Control Failure
cost cost

Design Appraisal Internal External

cost cost failure failure
Rise with increasing quality Fall with increasing quality

Figure 1.3 Cost of quality. ( Ron Basu; Also Wilds model for cost of
quality. Text book, 6th edition, p. 650).

from the non-value added activities or wastes in the process and is made up
of costs associated with

Prevention
Appraisal
External failure
Internal failure

The emphasis will be on prevention rather than detection, thus the cost of
supervision and inspection will go down. Prevention will go up because of
training and action-orientated efforts. But the real benefits will be gained by a
significant reduction in failures both internal (e.g. scrap, rework, downtime)
and external (handling of complaints, servicing cost, loss of goodwill). The
total cost of quality will reduce over time as shown in Figure 1.4 (see also
Basu and Wright (1997, pp. 116117)).
The concept of the law of diminished returns argues that there is a point
at which investment in quality improvement will become uneconomical.
Therefore the ethic of continuous improvement should aim at the appropriate
or optimum level of quality and then sustain it.
 Quality and operational excellence 11

Total cost
Cost

Prevention cost

Appraisal cost
Failure cost

Time

Figure 1.4 Total cost of quality ( Ron Basu).

Waves of quality management

Today, depending on whom you listen to, Six Sigma is either a revolution
slashing trillions of dollars from Corporate inefficiency, or its the most
maddening management fad yet devised to keep front-line workers too
busy collecting data to do their jobs.
(USA Today, 21 July 1998)

It has been two and a half years since the above statement was made.
During this time the Six Sigma revolution has created a huge impact in the
field of Operational Excellence, yet conflicting views are still prevalent.
Let us evaluate the arguments for both sides. On a positive note, the success
of Six Sigma in General Electric (GE) under the leadership of Jack Welch is
undisputed. In the GE company report of 2000 their CEO was unstinting in
his phrase: Six Sigma has galvanised our company with an intensity the likes
of which I have never seen in my 40 years of GE. Even financial analysts
and investment bankers compliment the success of Six Sigma in GE. An ana-
lyst at Morgan Stanley Dean Witter recently estimated that GEs gross annual
benefit from Six Sigma could reach 5% of sales and that share value might
increase by between 10% and 15%.
However the situation is more complex than such predictions would suggest.
In spite of the demonstrated benefits of many improvement techniques such
as TQM, BPR and Six Sigma, most attempts by companies to use them have
ended in failure (Easton and Jarrell, 1998). Sterman et al. (1999) conclude that
companies have found it extremely difficult to sustain even initially successful
process improvement initiatives. Yet more puzzling is the fact that successful
improvement programmes have sometimes led to declining business perform-
ance causing lay offs and low employee morale. Motorola, the originator of
Six Sigma, announced in 1998 that its second quarter profit was almost non-
existent and that consequently it was cutting 15 000 of its 150 000 jobs!
12 Implementing Six Sigma and Lean

To counter heavyweight enthusiasts like Jack Welch (GE) and Larry Bossidy
(Allied Signal) there are sharp critics of Six Sigma. Six Sigma may sound
new, but critics say that it is really Statistical Process Control in new clothing.
Others dismiss it as another transitory management fad that will soon pass.
It is evident that like any good product Six Sigma should also have a
finite life cycle. In addition, Business Managers can be forgiven if they are
often confused by the grey areas of distinction between quality initiatives
such as TQM, Six Sigma and Lean Sigma.
Against this background, let us examine the evolution of total quality
improvement processes (or in a broader sense Operational Excellence) from
Ad hoc Improvement to TQM to Six Sigma to Lean Sigma. Building on the
success factors of these processes the key question is: How do we sustain the
results? The author has named this sustainable process as FIT SIGMA (see
Basu and Wright, 2003).
What is FIT SIGMA? Firstly, take the key ingredient of quality, then add
accuracy in the order of 3.4 defects in 1 000 000. Now implement this across
your business with an intensive education and training programme. The result
is Six Sigma. Now lets look at Lean Enterprise, an updated version of classi-
cal Industrial Engineering. It focuses on delivered value from a customers
perspective and strives to eliminate all non-value added activities (waste) for
each product or service along a value chain. The integration of the complemen-
tary approaches of Six Sigma and Lean Enterprise is known as Lean Sigma.
FIT SIGMA is the next wave. If Lean Sigma provides agility and efficiency,
then FIT SIGMA allows a sustainable fitness. In addition the control of vari-
ation from the mean (small Sigma ) in the Six Sigma process is transformed
to company-wide integration (capital Sigma ) in the FIT SIGMA process.
Furthermore, the philosophy of FIT SIGMA should ensure that it is indeed fit
for the organisation.
The road map to FIT SIGMA (see Figure 1.5) contains three waves and
the entry point of each organisation will vary:
First Wave: As Is to TQM
Second Wave: TQM to Lean Sigma
Third Wave: Lean Sigma to FIT SIGMA

First Wave: As Is to TQM

The organised division of labour to improve operations may have started
with Adam Smith in 1776. However, it is often the Industrial Engineering
approach, which has roots in F.W. Taylors1 Scientific Management (1929),

1
Frederick W. Taylor a late 19th century American is remembered as the father of
scientific management. His philosophy was that management, by scientific means, should
find the best method of doing a job (method and equipment). Once the best method was
found workers were trained and offered incentives to increase productivity. Supervisors
were employed to maintain the best method. Workers were not expected to make
suggestions; their job was to do what they were told while management did the thinking.
 First wave Second wave Third wave

Customer SPC
focus tools
Value Shift from
management Senior variation ()
management to
Six Sigma Deployment
Management review integration()
tools plan
accounting (S&OP)

Total Sustainable
AS Ad hoc
IS
quality Six Sigma Lean Sigma Fit competitive
improvement
management fitness

Industrial Project Savings Periodic

Knowledge
engineering focussed target self-
management
assessment

Lean
Top Company Manufacturing
Lean
management wide manufacturing
commitment culture

Figure 1.5 Road map to Operational Excellence ( Ron Basu).

14 Implementing Six Sigma and Lean

that is credited with the formal initiation of the first wave of Operational
Excellence. This Industrial Engineering approach was sharpened by
Operational Research and complemented by operational tools such as
Management Accounting.
During the years following the Second World War, the first wave saw
through the rapid growth of industrialisation, but in the short term the focus
seemed to be upon both increasing volume and reducing the cost. In gen-
eral, improvement processes were ad hoc, factory centric and conducive to
pockets of excellence. Then in the 1970s the holistic approach of TQM ini-
tiated the second wave of Operational Excellence. The traditional factors of
QC and QA are aimed at achieving an agreed and consistent level of qual-
ity. However TQM goes far beyond mere conformity to standard. TQM is a
company-wide programme and requires a culture in which every member of
the organisation believes that not a single day should go by within the organi-
sation without in some way improving the quality of its goods and services.

Second Wave: TQM to Lean Sigma

Learning the basics from W.E. Demming and J.M. Juran Japanese companies
extended and customised the integrated approach and culture of TQM (Basu
and Wright, 1997). Arguably the economic growth and manufacturing domi-
nance of Japanese industries in the 1980s can be attributed to the successful
application of TQM in Japan. The three fundamental tenets of Jurans TQM
process are firstly, upper management leadership of quality; secondly, continu-
ous education on quality for all; finally, an annual plan for quality improve-
ment and cost reduction. These foundations are still valid today and embedded
within the Six Sigma/Lean Sigma philosophies. Phil Crosby and other leading
TQM Consultants incorporated customer focus and Demmings SPC tools and
propagated the TQM philosophy to the USA and the industrialised world. The
Malcolm Baldridge Quality Award, ISO 9000 and Demming Quality Award
have enhanced the popularity of TQM throughout the world, while in Europe
the EFQM was formed. During the 1980s TQM seemed to be everywhere and
some of its definitions such as fitness for the purpose, quality is what cus-
tomer wants and getting it right first time became so over used that they
were almost clichs. Thus the impact of TQM then began to diminish.
In order to complement the gaps of TQM in specific areas of Operation
Excellence high-profile consultants marketed mostly Japanese practices in
the form of a host of three letter acronyms (TLAs) such as JIT, TPM, BPR
and MRPII. Total Productive Maintenance (TPM) has demonstrated successes
outside Japan by focusing on increasing the capacity of individual processes.
TQM was the buzzword of the 1980s but it is viewed by many, especially in
the US quality field, as an embarrassing failure a quality concept that prom-
ised more than it could deliver. Philip Crossby pinpoints the cause of TQM
failures as TQM never did anything to define quality, which is conform-
ance to standards. Perhaps the pendulum swung too far towards the concept
of quality as goodness and employee culture. It was against this background
that the scene for Six Sigma appeared to establish itself.
 Quality and operational excellence 15

Six Sigma began back in 1985 when Bill Smith, an engineer at Motorola,
came up with the idea of inserting hard nosed statistics into the blurred philos-
ophy of quality. In statistical terms, Sigma () is a measure of variation from
the mean and the greater the value of Sigma the fewer the defects. Most com-
panies produce result at best around four Sigma or more than 6000 defects. By
contrast at the Six Sigma level, the expectation is only 3.4 defects per million
as companies move towards this higher level of performance.
Although invented in Motorola, Six Sigma has been experimented with by
Allied Signal and perfected at GE. Following the recent merger of these two
companies, GE is truly the home of Six Sigma. During the last 5 years, Six
Sigma has taken the quantum leap into Operational Excellence in many blue
chip companies including DuPont, Ratheon, Ivensys, Marconi, Bombardier
Shorts, Seagate Technology and GlaxoSmithKline.
The key success factors differentiating Six Sigma from TQM are:
The emphasis on statistical science and measurement.
A rigorous and structured training deployment plan (Champion, Master
Black Belt, Black Belt and Green Belt).
A project focused approach with a single set of problem solving techniques
such as DMAIC (Define, Measure, Analyse, Improve, Control).
Reinforcement of Juran tenets (Top Management Leadership, Continuous
Education and Annual Savings Plan).
Following their recent application in companies like GlaxoSmithKline,
Ratheon, Ivensys and Seagate, the Six Sigma programmes have moved to the
Lean Sigma philosophy, which integrates Six Sigma with the complementary
approach of Lean Enterprise. Lean focuses the companys resources and its sup-
pliers on the delivered value from the customers perspective. Lean Enterprise
begins with Lean production, the concept of waste reduction developed from
industrial engineering principles and refined by Toyota. It expands upon these
principles to engage all support partners and customers along the value stream.
Common goals to both Six Sigma and Lean Sigma are the elimination waste
and improvement of process capability. The industrial engineering tools of Lean
Enterprise complement the science of the statistical processes of Six Sigma. It
is the integration on these tools in Lean Sigma that provides an Operational
Excellence methodology that addresses the entire value delivery system.

Third Wave: Lean Sigma to FIT SIGMA

Lean Sigma is the beginning of the third wave. The predictable Six Sigma
precisions combined with the speed and agility of Lean produces definitive
solutions for better, faster and cheaper business processes. Through the sys-
tematic identification and eradication of non-value added activities, optimum
value flow is achieved, cycle times are reduced and defects eliminated.
The dramatic bottom-line results and extensive training deployment of
Six Sigma and Lean Sigma must be sustained with additional features for

FIT SIGMA is a registered trademark of Performance Excellence Limited, UK.

16 Implementing Six Sigma and Lean

securing the longer-term competitive advantage of a company. The process to

do just that is FIT SIGMA. The best practices of Six Sigma, Lean Sigma and
other proven Operational Excellence best practices underpin the basic building
blocks of FIT SIGMA.
Four additional features are embedded in the Lean Sigma philosophy to
create FIT SIGMA. These are:
1. A formal Senior Management Review process at regular intervals, similar
to the Sales and Operational planning process.
2. Periodic self-assessment with a structured checklist which is formalised by
a certification or award, similar to EFQM award but with more emphasis
on self-assessment.
3. A continuous learning and knowledge management programme.
4. The extension of the programme across the whole business with the shift-
ing of the theme of variation control () of Six Sigma to the integration of
a seamless organisation ().
Please refer to separate illustration in Figure 1.5.

Operational Excellence
In agreement with the waves of quality management, we have developed a
road map towards Operational Excellence and we note a convergence between
the two. Operational Excellence (OE) is a broader programme of improving
and sustaining business performance in which quality management is embed-
ded. OE is synonymous with Business Excellence and it also encompasses
other focused excellence programmes such as Manufacturing Excellence,
Service Excellence, Marketing Excellence and Supply Chain Excellence. For
most companies to be the very best in their industry and stay there is a long
journey which will need a long-term improvement plan of, say, 510 years.
Figure 1.6 helps us ascertain the steps towards achieving Operational
Excellence.

Step 4 Sustaining Operational Excellence

Step 3 Achieving Business Leadership

Step 2 Establishing Competitive Advantage

Step 1 Meeting the objectives of Operational Management

Both continuous improvement and step

changes are essential ingredients of
Operational /Excellence
OE means best managed business

Figure 1.6 Steps of Operational Excellence ( Ron Basu).

 Quality and operational excellence 17

Step 1: This is the stage of operational management where the business

objective is to keep it profitable by balancing what the customer wants with
the resources available.
Step 2: The company aims to achieve competitive advantage by bench-
marking with competitors. This is supported by a continuous improvement
programme. We call this stage Operational Improvement.
Step 3: The companys aim is to be best in class and the strategy is to
deploy a well-managed holistic quality programme such as TQM or Six Sigma.
This is the stage of OE.
Step 4: The aim of Step 4 is to sustain the benefits of Step 3 or OE. The
strategy will include sustainable processes (e.g. self-assessment, knowledge
management) of FIT SIGMA (see Basu and Wright, 2003).
It is evident that both continuous improvement and step changes are inte-
gral ingredients of OE.