Managing Quality, Innovation
and Knowledge
Quality Innovation and
Competitive Advantage
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Competitive Advantages
Denotes a firm’s ability to achieve market superiority
over its competitors.
Provide superior value for customers
In the long run, a sustainable competitive advantage
provides above-average performance.
A firm has many options in defining its long-term
goals and objectives, the customers it wants to serve,
the products and services it produces and delivers,
and the design of the production and service system
to meet these objectives.
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Competitive Advantages
A position where a firm is able to create more value
for customers than its competitors, while earning a
superior return on investment. Competitive
advantage requires position of superior resources
(tangible & intangible assets) and competencies that
are valuable, rare, durable and inimitable (hard to
copy).
Example: Kopi Luwak: rarity of the coffee beans
Creating a sustainable competitive advantage
depends on developing and executing a good
strategy.
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Quality & Competitive Advantage
Characteristics of a strong competitive advantage
Driven by customer wants and needs
Producers can charge premium prices for high quality
Quality improvement leads to increased market share
A significant determinant of business profitability
Matches the organization’s unique resources (CC) with the
opportunities in the environment
Durable and lasting and difficult for competitors to copy
Provides a basis for further improvement
Provides direction and motivation to the whole organization
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Sources of Competitive Advantage
Classic literature on competitive strategy suggests
that a firm can possess three basic (generic) types of
competitive advantage:
 Cost leadership;
 Differentiation; and
 Focus on a particular market niche
Modern thinking has added a fourth source of
competitive advantage:
 an organization’s people.
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Cost Leadership
A firm pursuing a cost-leadership strategy attempts
to gain a competitive advantage primarily by reducing
its costs below its competitors. To generate a
sustained competitive advantage depends on that
strategy being rare and costly to imitate.
Firms that practice this produce high volumes of
mature products and achieve their competitive
advantage through low prices. They emphasize
achieving economies of scale and finding cost
advantages from all sources.
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Cost Leadership
A cost leader can achieve above-average
performance if it can command prices at or near the
industry average.
Low cost can result from high productivity and high
capacity utilization. Moreover, improvements in
quality lead to improvements in productivity, which in
turn lead to lower costs.
A firm positions itself by leveraging its strengths.
Example: Wal-Mart, Redbox
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Differentiation
Is related with the development of a product or service
that offers unique attributes in its industry that are valued
by customers and that customers perceive to be better
than or different from the products of the competition.
The value added by the uniqueness of the product may
allow the firm to charge a premium price for it and achieve
higher profits.
The firm hopes that the higher price will more than cover
the extra costs incurred in offering the unique product.
However, a firm that uses differentiation as its source of
competitive advantage must make its products or systems
difficult to copy.
Example: Breezes Resorts
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Focus
a firm concentrates its resources on entering or
expanding in a narrow market or industry segment.
It is usually employed where the firm knows its
market segment and appealing to only one or a few
groups of consumers or industrial buyers, to a not
many select target markets. It is also called a
segmentation strategy or niche strategy.
Such products/services competitively satisfy
customers’ needs.
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Three generic types of competitive
advantage
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Three generic types of competitive
advantage
More Examples:
Toyota
LUSH
OSCAR HEALTH INSURANCE
Whole Foods
Four Quadrants Advisory
VIRGIN AIRLINES
ETSY
APPLE
NIKE
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Risks of the three generic strategies
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Organization’s People
The human resource is the only one that competitors
cannot copy, and the only one that can synergize –
that is, product output whose value is greater than
the sum of its parts.
The competitive advantage resulting from an
organization’s people can drive low cost and
differentiation.
Hiring and training better people than the competitor
can become an immeasurable competitive advantage
for a company.
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Focus of Strategic Quality Initiatives
TQM and performance: A strategic perspective
(Jiju & Preece, 2002).
Studies focused on the effectiveness of TQM
initiatives using self-assessment frameworks in
improving performance.
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Focus of Strategic Quality Initiatives
Example (1): USA General Accounting Office (GAO).
Common features among studies organizations:
Strong leadership, employee involvement, customer
focus, open culture and partnership programs.
Results: Improvements in employees relations,
quality, costs, market share, profitability and
customer satisfaction.
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Focus of Strategic Quality Initiatives
Example (2): An international quality study.
Industry: computer, automobile, banking &
healthcare.
Results: Process improvement and suppliers
accreditation practices improved performance.
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Focus of Strategic Quality Initiatives
However, a large number of studies have
shown that between 60% and 80% quality
initiatives fail or fail to show significant
impact o performance.
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Reasons for Lack of strategic focus in
quality initiatives
1. Management might not always understand the
implications or appropriateness of the quality
initiatives they adopt.
2. Conformance to requirements approach is
inconsistent with the strategic intensions of the
business, which should focus on customer and
culture.
3. Contiguous improvement did not permeate the
strategic process
4. TQM programs may lack focus on critical
business areas that have a good return on quality.
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Reasons for Lack of strategic focus in
quality initiatives
5. The lack of top management commitment
6. Lack of focus on critical business processes, no
resource support for long-term improvement efforts
and a lack of integration and synergy between TQM
programs and fundamental strategies of the
business.
7. Poor timing and pacing of TQM initiatives that
are generally crisis led.
8. Competitors can quickly imitate management
techniques, new technologies, inputs improvements
and superior ways of meeting customers’ needs.
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Reasons for Lack of strategic focus in
quality initiatives
9. TQM concepts and terminology are barriers to
success, because there is no consensus on the
meaning.
10. Quality initiatives are carried out in isolation, and
do not involve other departments and functions such
as marketing and strategic planning.
11. Quality initiatives are too introspective and
internally focused with little external focus.
12. Issues have been raised concerning selfassessment frameworks and their validity, real
effectiveness and strategic focus in improving the
performance of organizations.
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Reasons for Lack of strategic focus in
quality initiatives
13. Lack of infrastructure support for cultural change
and people issues.
14. Lack of focus and effective enterprise guidance
in targeting critical areas for change during quality
improvement programs.
15. Lack of measurements in all key areas,
particularly at a strategic level.
16. Managerial or organizational mind-sets, such as
they are individualist in nature, internally competitive,
problem solving and crisis oriented, linear thinking
and control oriented, are inconsistent with TQM
philosophy.
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propositions focusing on strategic quality
initiatives
To create and sustain competitive advantage, organizations:
1. Must build a posture that is so strong in selective
ways that the organization can achieve its goals despite
unforeseeable external forces that may arise.
2. Must continually satisfy the requirements and
expectations of the external environment.
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propositions focusing on strategic quality
initiatives
3. Must prioritize and focus quality initiatives on
critical areas or processes that result in:

customers’ appreciation of the added value to the
organization’s product and service, and their willingness to
pay for it over competitors’ products and services; and

adding value to organization’s profit, market share,
reputation and position, and to all its stakeholders, including
the community.
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propositions focusing on strategic quality
initiatives
4. Must be dynamic and have the ability to drive,
respond and anticipate the continually changing
forces, requirements and expectations of both
external and internal environment.
5. Must create and use an intelligent system that
stores and uses internal expertise and knowledge
required to support organization’s processes.
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propositions focusing on strategic quality
initiatives
6. Must measure the Cost of Quality (COQ),
otherwise resources are spent on improvements
customers do not care for and/or projects with only
marginal benefits.
7. Must report COQ extensively as a means of
accurately communicating the impact of quality
project on the business, thus enabling the prioritizing
and coordination of valuable resources and the
motivation of the personnel.
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propositions focusing on strategic quality
initiatives
8. Must have a concise guidance to implement
quality improvements effectively.
9. Must implement quality improvement programs
that focus on improving operational
effectiveness and satisfying both
customers and stakeholders.
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Focus of Strategic Quality Initiatives
Focusing on strategic quality initiatives results
High performance design
 Intrapreneurship
 Decentralisation
Superior service
Enhanced flexibility and variety
Continuous innovation
Timeliness
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Final Word
Even if you’re on the right track,
you’ll get run over if you just sit there
-Will Rogers
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Additional Readings
Barney, J. B. (1991). Company resources and sustainable competitive
advantage. Journal of Management 17, pp. 99-120.
Jaspreet Gill, (2009) Quality follows quality: Add quality to the business and
quality will multiply the profits. The TQM Journal, 21(5), pp. 530 – 539
doi http://dx.doi.org/10.1108/17542730910983434
Newbert, S. L. (2007). Empirical research on the resource-based view of the
company: An assessment and suggestions for future research. Strategic
Management Journal, 28, pp. 121-146.
Ulrich, D., & Lake, D. (1991). Organizational capability: Creating completive
advantage. Academy of Management Executive, 5(1), pp. 77-92.
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