Are Quality and Value The Same?
Is there a difference between 'quality' and 'value'? Should we have two teams, one for continuous improvement and one for Lean?
By Chuck Doyle
Senior Advisor
Lean Advisors Inc.
Quality and Value - Are they the same?
Many organizations we work with ask us some key questions about Lean and Quality - is there a difference between 'quality' and 'value'? Should we have two teams, one for continuous improvement and one for Lean? What roles would each have - what are the differences?
The source for this confusion is, a misunderstanding about 'quality' and 'value'. Part 1 of this series will deal with that misunderstanding. In Part 2 we will explore the roles and responsibilities, and the differences between the two teams at work.
Over several decades, companies have focused their quality initiatives on listening to the customer and reducing defects. Many of these initiatives have paid off and organizations worldwide have improved the quality of their products. Companies that didn't pay attention to customer needs and improve quality have fallen by the wayside - they simply couldn't make it in today's highly competitive and demanding environment. In both cases, a lot of money and resources were invested in the efforts.
Now that so many companies are dynamically improving competitiveness and bottom line performance with Lean methods for building customer value, the question becomes, "How does the Quality of the product fit into a Lean enterprise?"
The answer is clear. We know that they should fit. Toyota, the model of excellence in developing and applying Lean methods, is best known for its commitment to and achievement of superior quality. Quality is what grew their dominant market share and today keeps them on top of the competition. Toyota is, then, a practical example of quality and Lean working together for the benefit of the organization.
Research (Lucent Technology) has shown that customers who perceive high quality in a product will be prepared to pay a premium price. This looks like another important affirmation of a solid link between 'quality' and 'value'.
But first, let's make sure we are using the terms properly and look at the established definitions.
The American Society for Quality defines 'quality' as "a subjective term for which each person has his or her own definition. In technical usage, quality can have two meanings, (1) the characteristics of a product or service that bear on its ability to satisfy stated or implied needs, and (2) a product or service free from deficiencies." Of course, there are more definitions out there, but for the purposes of this article we are using the ASQ definition.
'Value' also has many definitions and Webster notes it as "(1) an amount, as of goods, services, or money, considered to be a fair and suitable equivalent for something else; a fair price or return, (2) monetary or material worth, and (3) worth in usefulness or importance to the possessor."
In Lean work, we define value as that for which the customer would willingly and knowingly pay. That's quite similar to the third definition we find in Webster's dictionary. We go on to say that the customer also decides on the timelines as well as the quality level of the product or service they are buying. Further, although we would all relish buying items of the best quality, our resource limitations tend to focus us on 'cost'. This is where the customer starts to look hard at the best 'value' for his or her time and money.
A question we should ask ourselves is why is the best quality product so often associated with high price? Sometimes people even mistake high price with good quality.
There's no question that most of us seem to believe that for a product or service to have good or exceptional quality, it will cost the producer more. Many of us still think that one-off specially crafted items are better than items that may be similar but mass-produced. In all of these cases we are really making value judgments. If we perceive that we get value for the money we spend, we are happy, if we don't, we are not.
When an organization goes Lean, the focus is on increasing the customers' perception of 'value' for the product or service produced. As we saw in the definition above, value is subjective to some extent. It's what the customer 'feels' he or she is getting. We can be certain that everyone would like better quality for the same or lower price. In almost all cases, the lower the price, the higher the quality, the better the perceived 'value'!
Lean companies build value by reducing turnaround times, lowering costs, and improving quality. These organizations aim at producing high volumes with equal or better quality than clients get from one-off crafted goods but at lower costs. We aspire to giving customers Lexus quality for the Saturn price. That is what beats out the competition and grows our market share.
What we see here is the elegant dance of quality and Lean value. They are both important and they are defined differently. Further, they are both required for success in today's economy. Customers are looking for value when they buy and quality is certainly one of the key features that build the value story. However, we cannot overlook costs, timeliness, and the ability to fully meet the customers' needs as the other essentials in creating value.
In Part 2 of this series, we will explore the 'how' of getting quality and value to work in organizations that are committed to customer-focused growth.