Industrial Excellence...1 Industrial Excellence Revisited What is industrial excellence? This question has generated enormous activ-ity over the past century, fuelled especially by

Christoph Loch, Ludo Van der Heyden,Luk Van Wassenhove, Arnd Huchzermeier,Cedric Escalle

Industrial Excellence

Management Quality in Manufacturing

February 24, 2003

SpringerBerlin Heidelberg NewYorkHong Kong LondonMilan Paris Tokyo

Contents

Part I Introduction

1 Industrial Excellence Revisited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.1 In Search of Industrial Excellence: Linking Total Quality

Management with Management Quality . . . . . . . . . . . . . . . . . . . . 51.2 Four Basic Industrial Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

1.2.1 The Supply Chain Process . . . . . . . . . . . . . . . . . . . . . . . . . . . 111.2.2 New Process Development . . . . . . . . . . . . . . . . . . . . . . . . . . 121.2.3 The Product Development Process . . . . . . . . . . . . . . . . . . . 121.2.4 The Strategy Formulation and Deployment Process . . . 13

1.3 Operationalizing Management Quality . . . . . . . . . . . . . . . . . . . . . 141.3.1 Fundamentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141.3.2 Enablers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161.3.3 The General Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181.3.4 Best-Factory Tours and Awards . . . . . . . . . . . . . . . . . . . . . . 18

Part II The Four Basic Processes

2 Visteon Charleville-Mézières Plant: Mastering Production . . . . . . 252.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252.2 Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 302.3 Supplier and Customer Integration . . . . . . . . . . . . . . . . . . . . . . . . . 32

2.3.1 Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322.3.2 Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322.3.3 Forecasting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

2.4 Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332.5 Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 392.6 New Product Development/Process Improvements . . . . . . . . . 402.7 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

X Contents

3 Faurecia’s Neuburg Plant: Customer Integration Excellence . . . . . 453.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 453.2 Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463.3 Quality Control and Trouble Shooting . . . . . . . . . . . . . . . . . . . . . . 47

3.3.1 Cooperation Between Faurecia and Audi . . . . . . . . . . . . . 473.3.2 Defect Rate and Error Handling . . . . . . . . . . . . . . . . . . . . . 483.3.3 Internal Quality Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

3.4 Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503.4.1 The Paper-less Picking Area . . . . . . . . . . . . . . . . . . . . . . . . . 523.4.2 The Assembly Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553.4.3 Inventory Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

3.5 New Product Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573.5.1 Small Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573.5.2 Large Development Programs Process . . . . . . . . . . . . . . . 583.5.3 Local Development Organization . . . . . . . . . . . . . . . . . . . . 59

3.6 Supplier Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 593.7 Moving Forward. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 603.8 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

4 Alstom Transport Equipment Electronic Systems (EES):Supplier Integration Excellence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 634.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 634.2 A New Beginning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 654.3 Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

4.3.1 Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 674.3.2 Make or Buy Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

4.4 Production Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 694.5 New Product Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 694.6 Servicing Over 30 Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 744.7 Supplier Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

4.7.1 The Alstom and Gespac Partnership . . . . . . . . . . . . . . . . . 754.7.2 The Alstom and Ardelec Technologies Partnership . . . . 79

4.8 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

5 Schwan-STABILO Heroldsberg – Technikum: ProcessDevelopment Based on People . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 855.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 855.2 Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 865.3 Fractal Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

5.3.1 Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 885.3.2 Quality Control and Assurance . . . . . . . . . . . . . . . . . . . . . . 91

5.4 Product and Process Development . . . . . . . . . . . . . . . . . . . . . . . . . 925.4.1 Product Changes and Process Improvement . . . . . . . . . . 925.4.2 New Product Development . . . . . . . . . . . . . . . . . . . . . . . . . 93

5.5 People . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

Contents XI

5.6 Customer Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 965.7 Supplier Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 965.8 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

6 Fresenius Medical Care Deutschland GmbH: New ProductDevelopment Excellence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 996.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 996.2 Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

6.2.1 Industry and Competitive Strategy . . . . . . . . . . . . . . . . . . 1006.2.2 Strategy Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

6.3 New Product Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1036.3.1 Customer Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1046.3.2 Technology Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1046.3.3 Combination of Basic Research and Product

Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1056.3.4 Product Modularity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1056.3.5 NPD Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

6.4 Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1076.4.1 Production Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1096.4.2 Quality Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

6.5 Supplier Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1106.6 Customer Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1116.7 The Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1126.8 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

7 The Solvay Automotive Group’s Laval Plant: Excellence inStrategy Formulation and Deployment . . . . . . . . . . . . . . . . . . . . . . . . 1157.1 Background: Becoming a Major Plastics Supplier to

Automotive Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1157.2 Strategy: Competing in the Automobile Industry . . . . . . . . . . . . 118

7.2.1 The Plastics Automotive Supplier Industry . . . . . . . . . . . 1187.2.2 SAG’s Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

7.3 Customer Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1217.4 Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1227.5 Deploying Strategy: Delegating Quality and Improvement

to Laval’s Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1247.6 Organizing Work Cells for Participation, Improvement, and

Flexibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1287.7 Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1327.8 Product and Process Development . . . . . . . . . . . . . . . . . . . . . . . . . 1327.9 A Communication Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1337.10 Measuring Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1357.11 Looking Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1367.12 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

XII Contents

Part III Management Quality

8 Johnson Controls’ Bochum Plant: People at the Center . . . . . . . . . . 1418.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1418.2 Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1428.3 Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143

8.3.1 Forecasting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1458.3.2 Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

8.4 Supplier Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1458.5 Product Introduction: Integration with NPD . . . . . . . . . . . . . . . . 1488.6 Process Development and Improvement . . . . . . . . . . . . . . . . . . . . 150

8.6.1 A History of Continuous Improvement . . . . . . . . . . . . . . 1508.6.2 Kaizen Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

8.7 Culture/Human Resources Policies . . . . . . . . . . . . . . . . . . . . . . . . 1528.8 Moving Forward. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1548.9 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154

9 Procter & Gamble Crailsheim: The Management QualityHeptathlete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1579.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1579.2 Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1599.3 Supplier Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1619.4 Customer Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1629.5 Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1639.6 Quality Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1659.7 New Product Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1669.8 Process Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1679.9 Employee Development and Delegation . . . . . . . . . . . . . . . . . . . . 167

9.9.1 Employee Development and Delegation in theMaterials Operations Department . . . . . . . . . . . . . . . . . . . 168

9.9.2 A View from a Process Engineer . . . . . . . . . . . . . . . . . . . . . 1689.9.3 Operations Manager of Alldays Panty Liner . . . . . . . . . . 1699.9.4 Motivation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170

9.10 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171

10 SEW Usocome: Consistent Management Quality in Operations . . 17310.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17310.2 Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17510.3 Perfambiance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17710.4 Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179

10.4.1 Production Forecasting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18210.5 Customer Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18210.6 Supplier Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18510.7 New Product Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186

Contents XIII

10.8 Process Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18610.8.1 Working Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188

10.9 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191

Part IV Plants in the New Millennium

11 Empirical Validation of the Management Quality Model . . . . . . . . 19511.1 Process Improvement Rates and Volume Growth . . . . . . . . . . . . 19511.2 How Management Quality Boosts Improvement Rates . . . . . . . 19711.3 Management Quality as an Interlocking System of Practices . . 199

12 Manufacturing at the Beginning of the 21st Century: a NewMindset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20312.1 Excellence Now: What Manufacturing Organizations can

Learn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20312.2 How to Use INSEAD’s IEA Questionnaire to Progress: The

SEW Bruchsal Usocome Example . . . . . . . . . . . . . . . . . . . . . . . . . . 20512.3 The Shifting Frontier of Excellence in the 21st Century: a

New Mindset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208

Part V Appendices

A The Industrial Excellence Award (IEA) . . . . . . . . . . . . . . . . . . . . . . . . 215

B The Questionnaire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221

C Data and Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231C.1 The Sample . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231C.2 Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232

D About the Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245

1

Industrial Excellence Revisited

What is industrial excellence? This question has generated enormous activ-ity over the past century, fuelled especially by the changing business land-scape arising out of the industrial revolution. Industrialization is concernedwith the emergence of explicit (as opposed to artisanal) ways of producinggoods. Setting up an explicit process for making cars has allowed repeata-bility and scale, as best testified by the evolution of the automobile industry,from garage job shops at the beginning of the century to the extensive globalautomobile enterprises we know today. Similar transformations have hap-pened in other industries, including equipment manufacturing, pharmaceu-ticals, electronics, and – more recently – housing construction and services.McDonalds, Pizza Hut, Carrefour, Wal-Mart, Benetton, Gap, and Zara arevivid corporate illustrations of this phenomenon.

Industrialization is often regarded as a “mature” or “pre-modern” con-cept. But is it really? We found it intriguing to revisit the state of industrialexcellence at the end of the twentieth century – one that has seen so muchprogress in this regard. To conduct an adequate survey of the existing stateof affairs would necessitate a detailed description of leading industrial prac-tices. We soon concluded that we also needed a precise framework or “lens”to guide our evaluation of the industrial sites we were about to visit.

These thoughts prompted us to initiate two Industrial Excellence Awards(IEAs). A first competition was initiated in France in 1995. Our “Top Usine”award was offered in collaboration with the French industrial magazineL’Usine Nouvelle, that provided the essential publicity for the competition aswell as recognition and exposure for the winning factories. Since 1997 wehave been offering the same award to German plants and industrial unitswith the title of “Die Beste Fabrik”, in partnership with the German eco-nomic weekly WirtschaftsWoche. Participating firms fill in a questionnairewhich is detailed in Appendix B. Answers containing supporting corporatedocuments are then analyzed. A small number of candidates are selected foran on-site audit comprised of an INSEAD faculty team, one or two membersfrom WHU, and several representatives of our two media partners. Win-

4 1 Industrial Excellence Revisited

ners and runners-up are selected by a jury comprised of INSEAD and WHUfaculty members and our media partners. Decisions are based on the doc-uments provided by the corporate contenders as well as notes from the sitevisits.

Eight years of the award programme have provided us with a rich sourceof knowledge concerning the state of excellence among industrial firms inFrance and Germany. This book aims to render a representative picture ofindustrial excellence as identified by the IEA. Indeed, most chapters are de-scriptions of the practices of a recent winner of the award. Other chapterscomplement this “picture gallery” with general comments offered in intro-duction or in conclusion. First, however, let us make explicit the questionsthat motivated us when visiting these firms:

• What does an excellent factory look like? How is it managed? And howis such a factory experienced by its employees?

• What are the “pillars” of industrial excellence? What should the indus-trial manager particularly pay attention to? Is it technology, people, pro-cess, or product, or a combination of these? And what, then, is their mu-tual relationship?

• What about the deployment of practices like SPC, JIT, or TQM that havereceived so much press over the last few decades? What place do suchapproaches hold in a broader picture of industrial excellence?

• What about supply chain and new product development activities, whichare receiving increasing attention in both the professional world as wellas in the operations management literature?

These were the questions we formulated when devising the questionnaireshown in Appendix B, with the aim of contributing to the ongoing journeytowards industrial excellence.

Our contribution comes in two parts. First, we present our “stories”–factual evidence of the state of industrial excellence in some of our winningplants. The book’s second contribution consists of providing a frameworkfor understanding and analyzing industrial excellence. Our major concep-tual observation is to overlay the classical industrial process view with a sec-ond, distinct dimension characterizing the quality with which the industrialprocess is managed. Simply put: process excellence requires managerial ex-cellence. They are the two pillars of industrial excellence.

The result is a more elaborate framework of industrial excellence incor-porating both the industrial process and the management that governs itsperformance and its evolution. A more complete and accurate picture of thefactors responsible for industrial excellence emerges which formalizes someof the “conventional wisdom” surrounding industrial excellence: it is not theprocesses alone nor the people that manage them, it is the fact that both fac-tors are at play – beautifully designed processes managed in a superb way.

Beyond this dual causality of industrial excellence, we have attempted, inkeeping with industrial tradition and the requirements of our questionnaire,

1.1 In Search of Industrial Excellence 5

to further specify what we mean by “process” and “management quality”.We identify four fundamental processes and seven managerial characteris-tics that, for us, underpin the factors yielding industrial excellence.

This, then, is essence of the book’s contribution: a representative descrip-tion of leading industrial practices coupled with a framework for presentingand understanding excellence of this kind. The framework is based on thedual notions of industrial processes and management quality; our argumentis based on descriptions of industrial excellence. Before commencing a pre-liminary explanation of our framework, we briefly review the huge literaturerelevant to our topic.

1.1 In Search of Industrial Excellence: Linking Total QualityManagement with Management Quality

Industrial excellence often evokes images of people rigidly tied to their ma-chines, putting in time at the expense of their personal lives, much like thecentral character portrayed by Charlie Chaplin in the film Modern Times (amust for any student of industrial excellence). Eight years of Industrial Ex-cellence Awards have left us with a totally different image; an image captur-ing a rich and diverse range of operators and managers jointly tackling andconquering industrial challenges for the benefit of the world around them,in a way that gives meaning to their work and their lives.

Our IEAs provide overwhelming evidence for the primary role playedby the quality of management – the primary focus inevitably being the man-ager of the industrial unit. There is no question that the ability of a plantmanager to articulate a clear direction, communicate this vision, and impressupon all collaborators a collective responsibility for the unit’s sustained per-formance, is a key characteristic portrayed by the managers of our award-winning units. Over these eight years our conviction has been strengthenedthat – more than competitors, more than technologies or government regu-lators – the key threat potentially facing any industrial unit is a change in itsleadership. Paradoxically, the tree of industrial excellence takes root at thetop.

This recognition of the key role of the plant’s management does not implythat these senior managers are necessarily recognized corporate “superstars”– though, in our eyes, they should be. These individuals indeed project thecharacteristics of management at its best: an understanding of the upcomingchallenges facing their industrial unit, a humble view of their own role andof the limited capacity of any single person to change things on his or herown. These leaders are deeply imbued with the necessity to continuouslyrecognize and respect the critical contributions made by their colleagues inthe management team on the one hand, and by all operators across the in-dustrial unit on the other. In sum, we reached the view that the quality of anindustrial unit is determined, more than by any other factor, by the quality


of the management of the unit understood in its broadest and most collectivesense. To the physical dimension that binds the operators along an assemblyor transformation line, one needs to add a managerial bond that links themall, operators and managers alike.

This conclusion is hardly startling in one sense. Does not the widely-touted Total Quality Management (TQM) movement make the same claim?After all, continuous improvement practices based on operator training, theuse of statistical methods, and a focus on customer quality, point in the samedirection. The TQM movement has spurred three continental contests – theDeming Prize in Asia, the Malcolm Baldrige National Quality Award in theUnited States, and the European Quality Award (awarded by the EuropeanFoundation for Quality Management). All three promote TQM as the keyto industrial competitiveness, upgrading its implementation to a nationalimperative!

In this book, we go beyond TQM and probe for the managerial and orga-nizational levers that provide an improved map of the journey to industrialexcellence. Let us not forget that the 1992 Baldrige Award winner, the Wal-lace Company, single-mindedly pursued TQM into bankruptcy two yearslater (Hill 1993, p. 75). TQM by itself cannot ensure industrial success. Theformula is more complex, as is evident from the approach guiding the Euro-pean Quality Award.

The success or failure of TQM, its proponents say, hinges largely on in-tangible factors including management commitment, corporate culture andclimate, the level of administrative skills, and “learning” within the orga-nization (Powell 1995, pp. 15–16). Unfortunately, to an executive decidingwhether to invest in a costly and time-consuming TQM program, such ob-servations provide an insufficient guide. What is an “appropriate” culture?Can one measure when a culture is sufficient to warrant the introduction ofTQM, and, if so, how can one measure the contribution TQM might make tothe culture of the firm?

To explain these discrepancies of outcome and offer more operational di-rections for improvement, several lines of argument have emerged. The mostprominent, surely, is the “Business Process Reengineering” (BPR) school(Hammer and Champy 1993), which many saw as a direct competitor ofTQM. BPR shifts the emphasis to more “radical” methods of change appliedto the (re-)design of a unit’s industrial processes. Rather than concentrat-ing on incremental and bottom-up improvements to existing processes, asrecommended in the TQM scheme, BPR targets the entire organization fora complete redesign of its critical processes. According to Hammer (1996,pp. 81–82):

“TQM is, at its heart, a problem-solving regimen [that] isolate[s] theparticular problems [. . . ] Re-engineering no longer seeks to enhanceindividual process stages, but reconsiders anew how they might bestbe put together.”

1.1 In Search of Industrial Excellence 7

Notwithstanding the differences in their approach, TQM and BPR arefundamentally similar in concentrating on process improvement and re-design (Cole 1994). They are increasingly viewed as complementary ratherthan incompatible, being aimed at different levers of change. As is the casewith TQM, the evidence supporting the BPR school is largely anecdotal.Hard evidence that either process improvement school – pursued on its own– has consistently enhanced industrial performance is scant (Powell 1995).

Resources

Dynamic Capability

Development

Activities

Fig. 1.1. From resource-based view of the firm towards dynamic capabilities

Other parts of the strategy literature also have salience for our purpose.One approach called the “resource-based view of the firm” goes back toPenrose (1959) and has been further developed by authors like Wernerfelt(1984), Rumelt (1984), and Powell (1995, 1996), among others. This ap-proach concentrates on how to best exploit the firm’s resources so as to en-hance efficiency and reveal “optimal product-market activities” (Wernerfelt1984, pp. 171–172). Wernerfelt defines a resource as “anything that could bethought of as a strength (or weakness) of the firm”. The fundamental ideais that the firm has at its disposal a finite stock of resources (R&D, processknowledge, HR, etc.) that form the basis of its performance. These resourcesare deployed in the firm across a set of activities which generate its basicrevenue flows.

The recognition that a firm’s resources take time to build, whereas itsactivities can be changed relatively quickly (Dierickx and Cool 1989), thushighlights the need for the management to pay due attention to the dynam-ics of resource development. Indeed, the underlying source of a firm’s per-formance is not to be found in its activities – which directly generate profitsbut are easily imitable – but in its underlying resources which are much moredifficult to acquire. The key to performance, according to this school of strat-egy thought, is the way resource endowments are built up (or down) overtime, something that is referred to as a firm’s “dynamic capability building”(Teece et al. 1992). (See also Fig. 1.1.)

The resource-based view acknowledges the usefulness of TQM and re-engineering school techniques as being part of a firm’s resource stock. Itsmain limitation is that its criteria for success are too abstract for the industrialmanager and do not provide a clear guide for action. From a conceptual


viewpoint, the resource-based view leaves too much for the manager “to fillin”.

Our framework aims at bridging this gap. On a more conceptual level,we also diverge from the sharp distinction between resources and activities,instead relying on the more operational notion of “industrial process.” Thisavoids the huge “grey area” surrounding questions of definition like whena process becomes a resource and when it remains an activity. We find theprocess notion a better concept for strategic thinking: it is clear for all to seeand must be seen in conjunction with the quality of the management thatis applied to it. When managed successfully, processes can over time be-come real “core competencies” for the corporation. Our final comment onthe resource-based view is that it is precisely through excellent process man-agement applied to core processes that dynamic capabilities are built. Indus-trial processes and their management are, for us, the keys to organizationalcompetence and performance.

A more externally-oriented strategic approach builds on the extensive in-dustrial organization literature of economics. Its most modern proponent isMichael Porter who therein found sources for his theory of sustainable com-petitive advantage – of which industrial excellence is a crucial aspect. It isremarkable that Porter’s approach, which had a quite different origin, con-verges to the same conceptual conclusion: competitive advantage rests onthe preservation of unique “assets” within the firm that cannot be easily imi-tated by its rivals. Also referred to as “differentiation”, uniqueness is embod-ied in a wide variety of forms including brand image, technology, productand process features, customer service and the like (Porter 1980, p. 37).

In a subsequent article appropriately titled “What is strategy?”, Porter(1996) makes a statement more directly relevant for those interested in in-dustrial practices. According to Porter, the fashionable search for quality andprocess improvement will, at best, yield “operational effectiveness”, or whateconomists might refer to as “economic efficiency”, that is, finding the mosteconomic way to use valuable and limited resources. Benchmarking activi-ties are ways to ensure that the industrial unit is on the “efficiency frontier”.Porter dismisses operational effectiveness as only a first step, albeit a neces-sary one, which, at best, allows the industrial unit to operate on a par withother market competitors.

Porter’s major point is that this “benchmarking with the market” shouldnot be confused with wider considerations of strategy aimed at preservingdifferentiation of the firm’s activities from those of its competitors. He arguesthat the exclusive focus on operational effectiveness is actually homogeniz-ing firms, driving down profit margins as firms copy each others’ produc-tion methods (or “best practices”) and engage in brutal price competition.Porter’s prescription for differentiation lies in choosing a clear strategy forpursuing differentiation and then sticking to it. The creation of consistencyin activities and, beyond that, of mutual reinforcement among all facets ofa company’s operations, is paramount for Porter. Uniqueness requires all

1.2 Four Basic Industrial Processes 9

of the firm’s multiple activities to become “aligned” and self-reinforcing.Therein lies the heart of differentiation. This book takes the same view, withone major caveat: we disagree with Porter when he states that operationaleffectiveness is at best an equalizer, not a differentiator. We present clearevidence – through example and statistical data – that Management Qualityrepresents a system of interlocking parts. Such a system is not easily imitableand can thus be a firm’s source of competitive advantage.

In a sense, Porter’s view of strategy is faithful to the great tradition of oneof the fathers of manufacturing strategy, Wickham Skinner, who so forcefullyargued for the value of “focus” in operations (Skinner 1969, 1974). A cleardirection understood and pursued by all and the substitution of costly trade-offs imposed by an overly broad corporate agenda for a focused operationalagenda allows the realistic and sustained pursuit of performance. Skinnerconsidered these to be the fundamentals of industrial excellence. Porter canbe viewed as having extended them to include a clear choice about a set ofcomplementary and self-reinforcing activities.

The work on “lean thinking” by James Womack and Daniel Jones – de-rived from a careful study of leading practices in the automobile industry– can also be considered a further characterization of the “focus” concept(Womack and Jones 1996). Going beyond the need for a clear value propo-sition as argued by Skinner, Womack and Jones introduce concepts such aswaste elimination, flow management, “pull” methods of manufacturing, andthe pursuit of perfection in operations as being fundamental to industrialexcellence. At the cost of some conceptual elegance, theirs is indeed moreoperational and prescriptive than competing strategic frameworks. Wom-ack and Jones do not limit themselves to ex-post references to well-knownsuccess stories. In contrast, they provide the industrial manager with recom-mendations of an operational nature that help in the formulation of an actionagenda aimed at excellence.

In this book, like Skinner and Womack and Jones before us, we take upthe quest for a clear and operational characterization of industrial excellence.As stated before, our characterization rests on the dual notions of process andmanagement quality.

We start our characterization with a discussion of four processes that weview as fundamental to industrial performance. Thereafter, we will presentour definition of the “management quality” that needs to be applied for theseprocesses to achieve excellence.

1.2 Four Basic Industrial Processes

This section examines the content of industrial excellence: What is it that anindustrial firm needs to do well in order to perform at an excellent level in asustainable manner?


New product development

Supply chain

ManufacturingSupplier integration Customer integration

Process development

Knowledge managementResource technology

Operations strategy formulation

and deployment

Fig. 1.2. The four fundamental processes of the industrial unit

Our answer consists of four sub-parts, each pertaining to a business pro-cess fundamental to industrial excellence. The originality of our contributionlies in identifying industrial excellence in clear process terms, as opposedto the traditional performance metrics of cost, service, speed, quality, andflexibility, which are then seen as the consequences of process managementchoices. Before elaborating, we first define the four process pillars of indus-trial excellence (see Fig. 1.2).

1. The supply chain process encompasses the physical supply activities ofgoods and services, from the delivery of material and information inputsto the industrial unit, to their transformation inside the unit, and theirdelivery to the client using existing distribution channel activities.

2. The process development process refers to those activities aimed at the im-provement of the industrial unit’s processes and activities, whether theypertain to the supply chain, to product development, or to other tasks ofthe organization, including strategy formulation and deployment.

3. The product development process consists of activities concerned with theimprovement of the firm’s current portfolio of products and services aswell as with the development of the industrial unit’s next generation ofproducts and services. This process is concerned with ensuring the com-pany’s future product and service portfolio.

4. The strategy process is concerned with the formulation and deploymentof the strategy chosen by the industrial unit in a way that engages theentire unit (and its current and future suppliers and clients) and sets cleargoals for it.


1.2.1 The Supply Chain Process

This process is concerned with the execution of current business: receivingmaterial inputs (supplies), converting them into products and services, de-livering them, capitalizing on the flow of information, and managing thephysical side of “value creation”.

Excellent managers have the ability to design and manage physical pro-duction as an entire system, from procurement to customer integration. Suchindividuals aim for the optimization of the overall system, including its con-stituent parts and their interrelationships (reaching all the way to the cus-tomer), rather than concentrating on individual aspects of industrial op-erations. In the language of the BPR school, such managers aim to “teardown walls” between supply, procurement, internal operations, and “down-stream” operations in a commendable effort to engender cooperation in thepursuit of mutual long-term interest (Hammer 1996, pp. 168–190). Mark-ing a sharp break with past short-term adversarial relationships, these closerindustrial ties allow corporations to enhance the quality of their operationsand services while simultaneously cutting costs. Suppliers are enticed toparticipate in this never-ending search for quality and continuous improve-ment by the prospect of longer-term contracts and enduring business rela-tionships. Furthermore, information on company and supplier performancemust be shared throughout the industrial system. This includes feedbackfrom customers via the distribution network and evaluation of suppliers inthe procurement network, quality controls, benchmarking, and supplier andcustomer input on potential improvements of the industrial unit’s processes.Indeed, the sharing of this information allows downstream clients to bettermanage the impact on their own activities of problems arising upstream inthe supply chain.

This shift to a more horizontal view of industrial activities is further fos-tered by the growing focus of many corporations on their core competencies.This reduced industrial scope is realized through the outsourcing to supplypartners of a number of activities previously handled inside the firm. Theimperative to incorporate the best and often most technologically-advancedcomponents in their products has forced companies to increasingly scan themarket for superior supply capabilities and thus elevated supply chain is-sues in the mind of managers. The globalization of supplier networks hasalso added tremendous cost pressure and has resulted in further disintegra-tion of traditionally integrated companies (Trent and Monczha 1999). Feware the firms today that are not active in the supply chain “game.”

Finally, we wish to stress the need for the supply chain to include a clearinterface with the customer. “Customer integration” has become the finallink in the supply chain. In our view insufficient attention has been paid tothe way the supply chain interacts with the customer. The “Intel Inside”campaign is a reminder that the supply chain reaches all the way to thecustomer’s mind. Over time, a plant’s performance does influence the cus-


tomer’s final purchase decision and satisfaction. Critical, then, is the correctdefinition of the customer, especially in the industrial context where the im-mediate client tends to differ from the final customer and what he or sheseeks (Kim and Mauborgne 1997). Customer integration may indeed be afirm’s differentiator and the cause for an industrial unit’s performance. Anoverly internal focus may lead a firm to pay insufficient attention to customerrequirements, even to the point of ignoring the customer experience. Theseissues, too, must be part of the supply chain debate inside an industrial unit.

1.2.2 New Process Development

Herein lies one of the great contributions of Japanese manufacturers overrecent decades: the view that process improvement and development is keyto industrial competitiveness. This was well described in the MIT study ofthe automobile industry, entitled “The Machine That Changed the World”(Womack et al. 1990).

Products and services are only the outputs of ongoing business processesor “ways of doing things.” Competitiveness must thus be rooted in a su-perior ability to run these business processes. Furthermore, “best practices”diffuse over time, making process improvement an ongoing competitive re-quirement. Pushing this argument to its conclusion, sustainable competi-tiveness must, then, be rooted in a superior ability to improve one’s pro-cesses faster and better than one’s competitors. This view is articulated in“Dynamic Manufacturing: Creating the Learning Organization” by Hayeset al. (1988) and in the widely-read “The Fifth Discipline” by Senge (1990).This emphasis on learning has been fuelled by the IT revolution. The re-markable development of information technologies has promoted the viewthat information should flow freely throughout the organization and becomeavailable to all. This associates process development closely with informa-tion and knowledge systems, which have both gained in prominence overthe last decade. We recognize this important development by including pro-cess development as a separate process in our excellence framework.

1.2.3 The Product Development Process

In the last decade, much attention has been paid to the importance of prod-uct development for the economic health of the industrial unit (Wheelwrightand Clark 1992, 1995). Any industrial framework today must explicitly in-tegrate this fundamental aspect. The mission of product development is tocreate the means to generate future business; it does so through the designof new products and services or through upgrades of current products andservices.

In a competitive market, firms are required to regularly develop newproducts or upgrade existing ones. Distinguishing their own products fromthose offered by competitors is a necessity. Yet product parameters cannot


be planned in isolation from the industrial processes. It is well understoodthat product and manufacturing process design are, in fact, one system thatmust be designed as a whole: product design influences manufacturing per-formance, and the manufacturing system influences the product design’sfunctionality (Nevins and Whitney 1989). For example, product variety andproduct costs, design quality and costs all require trade-offs between what isideally desirable and what is economically justifiable. Given rising – but alsomore volatile – consumer expectations, striking the right balance betweentime-to-market, price, and quality in products and services has become acritical challenge to managers (Ulrich and Eppinger 2000). The speed and ef-fectiveness with which the product development process is managed is thuscritical to the unit’s performance; indeed, it is from this that new responses tocustomer desires and challenges emerge. The product development processhas come to the forefront of the industrial landscape.

1.2.4 The Strategy Formulation and Deployment Process

We have already referred to the view advocated by Porter (1996) that all ac-tivities of an industrial unit must contribute to the pursuit of a clearly for-mulated and shared goal for the unit. The formulation and deployment ofa clear and distinct strategy thus represents a process of critical importance:the process by which targets and goals are set as well as criteria for success.This process should engage both management and workers by setting pri-orities in the pursuit of a common collaborative agenda. It then involvesthe systematic evaluation of progress in this pursuit and the formulation ofcorrective actions should goals prove elusive or not well-formulated.

One too easily assumes that the process of defining a goal and checkingprogress towards it is simply a matter of “strategic leadership” and synony-mous with having a leader for the industrial unit of appropriate “strategic”vision. This, in our opinion, is too simple a view as we will illustrate. Theleader works in a context which he/she influences, even shapes, but only tosome extent. While leadership succession is indeed important, every leadertypically is chosen as the outcome of a decision process (e.g., Collins and Por-ras 2000, pp. 170–173). Before a leader appears on the scene, many processesare in place, poised to contribute to that leader’s success, and vice versa. Pos-sibly the most important leadership action is the design and execution of theprocess by which business strategy is formulated, information gathered andanalyzed, and goals and progress measured, communicated, and evaluated.It is this “process view of strategic leadership” that is presented here: theview that competitiveness is rooted in business processes more than in theinnate qualities of any particular individual who happens to assume, for aperiod of time, the ultimate responsibility for the performance of an indus-trial unit. If this were not the case, the fortunes of industrial units would goup and down with their leaders. This may be the case, but one should thentalk about leadership excellence, not industrial excellence. Subscribing to the


view that a leader is only as good as his support team, we will examine howleadership teams systematically interact with each other so as to formulatestrategy and deploy it throughout an industrial unit.

Our strategic framework thus lines up with the “process” side of the strat-egy literature and is more neutral on the actual content of the pursued strat-egy. In other words, regardless of the details of their precise strategic plan,excellent industrial managers share a few characteristics in the way they for-mulate and deploy strategy. First, they ensure a strategy is formulated whosepieces work together so that the company moves forward in a coherent direc-tion. This requires that the various business processes “fit” together and thatoptions that would not make sense for the entire system are eliminated, atleast until the sub-processes that might create obstacles to success are madeto evolve in the right manner. Second, the “fit” has to be clear to the actors ofthe various processes. This means that top management has to (1) communi-cate its strategy effectively, from middle managers to operators on the factoryfloor, and (2) be open to input from these individuals regarding the problemsthat may arise in the pursuit of the chosen strategy. Excellent managers donot merely dictate what must be done, they clearly articulate company goalsand the motivation behind them while allowing for adequate flexibility inimplementation (Porter 1996).

Having positioned a strong process orientation as one of the two pillars ofour basic framework, we now turn to our second pillar, which concerns themanagement quality that needs to be applied to these key processes if theyare jointly to excel.

1.3 Operationalizing Management Quality

Repeated observation of the leadership of some of the best industrial units inFrance and Germany has led us to formulate a model of management qualitythat formalizes the best managerial practices observed. The model proposedthus has the validity of being grounded in repeated observation and alsoin common sense. Other models of management quality (e.g., Powell 1995,Ittner and Larcker 1997, Miller and Roth 1994) share features with our model,but none is as precise and complete in its operational description.

1.3.1 Fundamentals

The first three aspects of management quality are well known and are typi-cally regarded as the essence of “good management”. At this level, our con-tribution might be that we single out “integration”, at the same level as theother two, namely “direction setting” and “delegation” (see Fig. 1.3).

1.3 Operationalizing Management Quality 15

Communication

Measurement

Direction setting

Delegation

Participation

Integration

Employee development

Fig. 1.3. Components of management quality

Direction setting. Management starts with clear direction- (or goal-) setting.Short of a clear direction, actions can be at best partial and at worst con-fusing, communication remaining incomplete and ambiguous. Thoughdirection-setting alone is not synonymous with management quality, itcertainly is its first necessary condition. At the plant level, direction-setting is facilitated by a clear focus, as well argued by Skinner (1974).No one set a better example of direction-setting than President John F.Kennedy when he challenged his fellow Americans to send a man to themoon, or than Winston Churchill, when, as Prime Minister, he commit-ted his British compatriots to resist the enemy during World War II. Theseexamples underline the necessity for direction-setting: to be clear, moti-vating, and operational. By “operational” we mean that upon hearingthe direction set, each individual concerned will start thinking of waysto contribute to the announced goal.

Delegation. It is equally clear that management essentially consists of orga-nizing work for others. In short, management entails substantial dele-gation. One regularly hears of “poor managers” trying to do too muchthemselves, perhaps driven by the conviction (maybe rightly) that theircontribution is of higher quality than that of their collaborators. Today,factories employ more complex, capital-intensive technologies than inthe past. They must respond more quickly to changes in globally com-petitive markets with employees that may be more difficult to lead thanbefore. So it is not simply work that needs to be delegated, it is the tra-ditional top-down, command-and-control structure that needs to be re-viewed, literally from top to bottom. Senior executives are increasinglylearning to delegate decisions to functional departments and teams that


have more direct and detailed knowledge of manufacturing or serviceprocesses. This trend toward decentralization of decision-making is alsoreferred to as “employee empowerment” (Powell 1995, Ittner and Lar-cker 1997).

Integration. The complement of delegation is integration. The more deci-sion-making is decentralized, the more one must regularly re-align allto the common goal. This is the case both within the firm and in rela-tions with suppliers. Horizontal integration ties the firm into the sup-ply chain, aligning it not only with its suppliers but also with its cus-tomers. These links are considered vital to achieve fast response times,high quality, and competitive costs. Vertical integration refers in thisbook to the strategy deployment process, requiring the formulation ofconsistent sub-goals for each organizational sub-unit as well as priori-tization and the assignment of responsibility. Finally, temporal integra-tion of the firm – the near-simultaneous execution of research, marketing,design, and manufacturing problem-solving – further reduces time-to-market and enhances manufacturability (Wheelwright and Clark 1992;see Hendricks and Singhal 1997, Datar et al. 1997 on the advantagesof being early to market). These integration linkages rely on both openinformation (to see all effects of individual decisions) and aligned incen-tives (to pursue the global rather than the local goal).

1.3.2 Enablers

Direction setting, delegation, and integration are supported by four enablingmanagerial practices if they are to function well.

Communication. First, directions and goals need to be communicated fre-quently and to all employees in order to become a shared reality withinthe industrial unit. Delegation and integration similarly require excel-lent communications. Effective communications establish an open cul-ture and equip employees with the information necessary to make de-cisions consistent with the goals of the firm, and foster alignment andintegration.

Measurement. Second, measurement, both qualitative and quantitative, al-lows managers to keep track of performance as well as its drivers (forthe study of causality). If the processes are not well-measured, noamount of progress can be validated with sufficient certainty whichmakes direction-setting a sterile exercise.

Employee participation. Third, a proper attitude of participation in the ac-tivities of the industrial unit is paramount to achieving success. Employ-ees need to be motivated to make contributions to the unit that transcendtheir job descriptions. To foster such behavior, team-based forms of co-operation as well as non-financial and teamwork performance measuresare frequently employed (Ittner and Larcker 1997). For example, one


plant manager told us: “We have employees who responsibly and com-petently manage a large budget of, say, €50,000 in their local sports clubat home. But when they arrive to change in our locker rooms in the morn-ing, they literally check out their brains together with their clothes. Themanagerial and organizational challenge is to get all employees to usetheir intelligence here as well; the payoff would be huge.”

Employee development. Fourth, too often employees are eager to contributeto the goals set by the management but lack the proper know-how to doso. Employee development is an essential tool to foster employee partic-ipation and to contribute to decision-making. This includes continuoustraining as well as the management of career paths that offer opportuni-ties for personal development and career advancement. Employee devel-opment is shown at the bottom of Fig. 1.3 not because it is “lowest in thehierarchy”, but because it is the absolutely fundamental pillar for man-agement quality. Delegation of ever-more-complex decisions can only besuccessful if employees are given the chance to acquire new knowledgeand develop new skills and confidence through such development chal-lenges. This may be ultimately seen as a matter of fairness: can it be fairto ask employees to participate in the firm’s destiny and make best per-sonal efforts that go far beyond standard job descriptions, if they are notgiven the chance to advance themselves and their careers?

The above definition confirms and repeats many common views of man-agement quality, but it does so in a framework that seeks completeness. Eachcharacteristic is easily seen to enhance management quality by itself; it doesso even more in presence of the other characteristics. Better communica-tion clarifies the chosen direction, motivates employees, and results in in-creased employee participation. On the contrary, the absence of communi-cations could just as easily be conceived as leading to unsatisfactory unitperformance. The “enablers” can be seen as the glue necessary to “make thefundamentals stick”.

Another comment to make in support of our definition of managementquality is that it applies across a very broad spectrum of organizational unitsand sub-units. The definition applies to a firm, a plant, a work group, anda project team. A faculty member working with a group of students canbenefit from the framework. As stated earlier, the absence of any one ofthe characteristics can easily be thought to lead to sub-optimal learning bythe class. Similarly, to achieve optimal results, no TQM or BPR effort cansucceed unless it applies the effort with a due level of “management quality”,as defined above. Again, a checklist of “quality attributes” is easily generatedfrom our list.

We have thus outlined the key of our industrial excellence framework:management quality applied to the processes that drive the performance ofan industrial unit. Our framework of industrial excellence can be seen as an


extension of the TQM and BPR schools in a manner that integrates manage-ment quality with process excellence.

1.3.3 The General Framework

The four processes – supply chain, process development, product develop-ment, and strategy – overlap and support one another. So do the attributesdefining management quality (see Fig. 1.4 for a graphic representation ofboth process view and quality of management). Coherence and synergy canthus be found within each of our two broad categories. But deeper coherencecan also be found between our two broad categories in that it is managementquality that is needed to reach excellence in each of the fundamental pro-cesses and also in the industrial unit itself. In other words, managementquality “oils” the performance excellence of the individual processes, andalso of the entire unit.

The framework, basing a process view of industrial excellence on a foun-dation consisting of management quality, is the conceptual contribution ofthe book as illustrated in the chapters to follow where nine selected indus-trial units are described from this dual perspective. This was the perspec-tive that guided us when formulating the IEA questionnaire that became ourprincipal instrument in our search for and validation of industrial excellence.

1.3.4 Best-Factory Tours and Awards

The 10-page IEA questionnaire is broken down into four segments, corre-sponding to the four basic business processes (Appendix B). Across eachprocess we probe for the extent to which the seven dimensions of manage-ment quality are applied. Respondents are managers of industrial units inFrance and Germany which put themselves forward as candidates for ourIEAs. Together with their management teams they fill out the questionnaire.As attested by a number of plant managers, this exercise is a learning activityin itself, providing the team with a useful and novel analysis of the workingsof their industrial operations. (See Chap. 12 for the story of one companythat has resolutely adopted our questionnaire for its own benchmarking andprogress activities.)

The submitted questionnaires are then graded by our faculty team andthe top scorers are selected for intensive one-day follow-up visits. It is theapproximately one hundred factory visits accomplished over the last eightyears that have provided us with the opportunity for learning grounded inindustrial excellence. Each year, the selected winners and their operationsare described in feature articles in L’Usine Nouvelle and WirtschaftsWoche, re-spectively. These winners have also provided the empirical content for thisbook.


New product development

Supply chainManufacturingSupplier integr. Customer integr.

Process developmentKnowledge managementResource technology

Operations strategy formulation

and deployment

Employee development

Integration

Measure-ment

Direction setting

Participation

Delegation

Cummuni-cation

The

basi

cbu

sine

sspr

oces

ses

Man

agem

entq

ualit

y

Fig. 1.4. Management quality applied to the four basic business processes

The nine chapters that follow consist of detailed case studies of a sampleof past IEA winners. Each was selected for this book with a view to illu-minating how industrial excellence is achieved and each also illustrates anaspect of our excellence framework. So each chapter serves a dual purpose.

Before beginning a detailed examination of these industrial units, we pre-view the major aspects illustrated by each case. The first six chapters illus-trate and explore the process view of industrial excellence, whereas the lastthree focus more on management quality (see Table 1.1 for a summary viewof how the chapters illustrate our framework).

We start the plant tours with an illustration of excellence in supply chainmanagement. The Visteon plant (Chap. 2) in the French Ardennes illustrates


Table 1.1. The plan of the book

Part Chapter Basic busi-ness processes

Managementquality dimensions

I Introduction 1 Introduction All are introduced All are introduced

II The four ba-sic processes

2 Visteon Manufacturing Direction, commu-nication, measure-ment, participation

3 Faurecia Customer inte-gration

Direction

4 Alstom Supplier integration Integration5 Schwan-

STABILOProcess develop-ment, technologymanagement

Participation, del-egation

6 Fresenius Med-ical Care

New product de-velopment

Direction, mea-surement

7 Solvay Laval Strategy de-ployment

Direction, delega-tion, participation,communication

III Managementquality

8 Johnson Controls Manufacturing Direction, peopledevelopment, par-ticipation, integra-tion, communication

9 Procter & GambleCrailsheim

Strategy deploy-ment, manu-facturing

All dimensions

10 SEW Usocome Strategy deploy-ment, manufac-turing, customerintegration

All dimensions

IV Plants in thenew millen-nium

11 Empirical val-idation

All processesanalysed

All dimensions com-mented upon

12 Our summaryview and futureoutlook on indus-trial excellence

V Appendices A The IndustrialExcellence Award

B The question-naire

C Data and mea-sures


the complexity of the manufacturing system prevalent in the automobile sec-tor. Management strengths described include direction-setting, communica-tion, measurement, and employee participation.

The Faurecia factory (Chap. 3) provides an excellent example of customerintegration, though new product development and production processes arealso noteworthy. The Alstom plant (Chap. 4) exemplifies integration in sup-plier management; its new product development and customer integrationactivities appear as complementary strengths as well.

The Schwan-STABILO plant (Chap. 5) is a remarkable example of processdevelopment and technology management. Plant management is very at-tentive to foster the participation of all employees in its goals and the unitexemplifies delegation.

With Fresenius (Chap. 6), we turn to new product development (NPD),earlier referred to as an essential weapon in determining the future competi-tiveness of the unit. Solvay’s Laval unit (Chap. 7) shows the long and difficultroad that must be travelled to reach world-class performance status. It alsoshows that strategy formulation and deployment must be accompanied byclear direction-setting, participation, communication, and delegation.

With Chaps. 8–10, we look more specifically at management quality. John-son Controls (in Chap. 8) illustrates people management and developmentand how such activities contribute to industrial success. The P&G industrialunit (Chap. 9) offers evidence of all dimensions of management quality, asdefined in our framework. SEW’s plant in Hagenau (Chap. 10) demonstratesthe consistency that needs to be applied for industrial success, and that suchconsistency does not come at the expense of performance or employee satis-faction but, in fact, can generate both economic and human rewards.

Chapter 11 shifts from “examples” to systematic data analysis. Based ondata from the 1997 IEA competition, we demonstrate that the application ofmanagement quality across an industrial unit’s basic processes strongly pre-dicts that unit’s performance, measured as growth. Moreover, the data showthat management quality represents a system of interlocking elements thatreinforce one another. Management quality, seen as a systemic feature, canthus be seen as a core competence of an industrial unit, yielding competitiveadvantage over time.

Our concluding chapter (Chap. 12) reviews the insights gained from these“best factory explorations” and from the statistical patterns associated withthem. We conclude the book with some views on the trends in industrialexcellence that emerge from the examples described.

We hope that, at the end of this journey, the reader will feel better in-formed and equipped to understand the contours and shapes of industrialexcellence in the coming century. The journey is far from over.

Documents

Industrial Excellence...1 Industrial Excellence Revisited What is industrial excellence? This question has generated enormous activ-ity over the past century, fuelled especially by