The balance Scorecard and EFQM approaches to performance improvement are design to innovate. To what extent does the obsession with ISO and standardization in qualities systems compromise this?
During the late 20th century, quality as a way of management by profession was introduced. It was soon been recognized by many as quality has achieved status as a recognized profession. These which has been contributed by William Edwards Deming, that through appropriate way of operating, firms are able to have continual improvement thus by cost reducing as it become efficient. His research was proven effective in the case of improving production in the United States during World War II, although he is perhaps best known for his work in Japan. As this quality management is introduce, it bring with it the concept to be better in both product and services as quality to serve the customer better a form of quality, in bring along with it the concept of innovation.
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In these modern days, competition has become even greater than before, firms operate in markets characterized by globalization, strong competition, ever smaller market segments, evolving technologies, substitute products, shorter product life cycles, and the bargain of consumer's power. Which so innovative firms create more value to the shareholders in the long-term (Hamel, 1997). So firm were forced to stay innovate continually just to stay competitive for long term.
Innovation, always refer to renewal or improvement. According to Jose Campos "innovation refers to the ability to deliver new value to a customer" thus it is the "changes that creates a new dimension of performance" which also been inspired by Peter Drucker. Today as the concepts of firms continues to change, thus to look for new ways to remain competitive and profitable, firms urge for innovation. For an excellent example, innovations at Ford from generations from Henry Ford to his great-grandson Bill and today have made the brand success as respected car producers and remain a competitive in the market for over 100years by practicing innovation.
It is important for peoples to keep changing ways of doing, decision made for firms or even in a daily life. To support this, Schumpeter(1930) states that "innovation changes the values onto which the system is based". When changes have been done there will be space for doing better. For firms the changes must bring along increase in value, for either customer or producers. It must bring positive change which increase productivity and income.
Innovation by Business Models
Business Model Innovation (BMI) is made for this firm's innovation purpose. It refers to the creation, or reinvention, of a business. Clayton Christensen, a Professor in Harvard Business School, write about the importance for business model to innovation as one of the important element to be successful in the market. In the book he suggested that the business models are needed to maximize the reach of the technology and covering all value that would develop gradually to solve firm's issues.
In accordance with this, many people, government and firm have come out with their own theories or using others model to improve quality systems for business excellence. These theories which is created such as Balance Scorecard, Total Quality Management, Malcolm Baldrige National Quality Award (1987), and European Foundation for Quality Model are the concept of measuring the output of a particular process or procedure, then modifying the process or procedure to increase the output, increase efficiency, or increase the effectiveness of the process or procedure. In short using these models to operate will helps firm having improved performance, to motivate, and most importantly to innovate, when it is use correctly.
Among the famous and have higher success rate are such as the balance scorecard which were design for strategic management tool that originate aims to provide managers with better and more relevant information about activities in the firms to be managed by managers rather that which is just provided by financial measures which is practice traditionally. Through balance scorecard the four key aspect activity of the firms can be identified by managers and to be improving to perform a better performance eventually it helps manager to be innovated as information are collected efficiently in various aspect, were each important are been taken care, and that decision will not base on single type information which does not consider the bigger picture that which sometimes maybe insufficient to made the effective decision for the firm. These performances therefore increase with innovation for manager to bring the firm nearer to higher success.
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Secondly the model EFQM Excellence Model aka European Foundation for Quality Management is a practical tool that helps establish appropriate management systems by measuring the firm condition; helping them understand the gaps; and then stimulating solutions. This will eventually help the firm to focus on their ability as key performances are found to stay competitive and hence increase innovation for the firm to improve in its quality. For example Apple Inc. have been focusing on touch screen product such as Iphone, Imac, Ipad etc as the firms know what they customer urge for quality on those product and the firm have keep upgrading this innovating key performance as better satisfying second generation of product are been introduce to customer that is of with better quality variously according to customer taste, perception, and buying behavior. This clearly shows Apple Inc demonstrated innovation in business model more than just product, service, technologies, and innovation. But it combines two or more models to deliver value in a new way.
To illustrate more how the models helps to innovate we need to understand each benefit of these models, contribution it bring to a firm as these above tool are use as a guideline for a firm to preserve their competiveness and bringing innovation that benefit the firm tangibly and intangibility. For example in summary, with BSC it helps to innovate as it helps manager to communicate firms strategy with everyone in the firm, evaluating the potential value that could be created by the four areas, aligning those new innovation with strategic objective of the firm, identify those of innovation employees and department that would to reward effectively thus bring in motivation. Thus innovation can be continuing with the information collected that benefit the firm to stay innovative.
While the excellence model stresses the importance in assessing firms strengths and areas to improve. It then will help innovate as it provides a direction for the firm to stay active or strong to complete. This attention to focus helps manager to have a positive direction to be innovated. For example maxis mobile network firms started to focus on their policy and strategy where the firm is strong at to get customer result. This is as maxis create a new brand name for product that it for the new targeted market as they have good network coverage. Innovation also comes in as excellence model gives decision maker a clear vision of the firm activities and is useful for planning as it emphasize how to achieve them. This will naturally install a culture to of continuous improvement by the managers to have the best performance.
Innovation also brings in quality which is needed in this global market as consumers have the power to choice what they felt best suitable for them. In so a guideline of product quality is being introduce which is called ISO (International Organization for Standardization). It is created to maintain certain quality to a product that a firm must meet in order to distribute to the market. The ISO standards have a number of benefits. While these systems may demand time and resources when being created and implemented, the benefits will continue for as long as the procedures and processes are followed. And this will outweigh any disadvantages or inconveniences that a quality management system brings.
It is important to practice ISO because it separate firms from its competitors when consumers make its buying decision come from how consumers perceive quality. With quality, firms are able to gain reputation in the marketplace, and therefore remain competitive. Because quality determines continues purchase, it play a very importance role to consider. With quality or various differentiations being practice by each firms, innovation come eventually to the mangers to improve and serve the quality to the targeted market.
Although Quality System implementation is the most effective management tool; it does not guarantee total quality, as qualities in product alone are not enough. This is as every employee of the firms has to be committed to uphold and maintain the integrity of the system and is responsible to consistently strive for quality. This can be solve or manage by practicing the balance scorecard for example, with it there will be better quality that serve through the entire firm from product and form top management to tactical employee will helps to create a better communication inside the firm and with the customers. Thus it is whole firm responsibility to create motivation that will enable to promote innovation as in whole. For example,
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As ISO being adopted over the years, it is been found innovating and bring good feedbacks for firms that practice it. This argument can be seen on many research that have been done over the years on firms that practices ISO effectively without fail, for example according to Dun and Bradstreet findings 85% of registered firms have reported external benefits including higher perceived quality and greater customer demand. While for the internal operations of registered firms 95% report internal benefits by ISO including greater employee awareness, increased operational efficiency and reduced scrap expense.
Another research firm, Irwin Professional Publishing also has survey on some ISO practicing firms and found 83% firms those have products with a higher perceived quality in the market place while 30% of the firms experience increased customer demand. This identify that innovation through quality bring in better efficiency effectively both inside and out of the firms and as the environment of firm is good , employees will motivated too.
Theses tool, are essentials for a firms to have the guidelines needed for their both long term and short terms strategies. It do not mean that firm should followed it fully from step to step just focusing to increasing profit, to prevent failure or just to follow competitor alone. As doing so that will somehow limit the firm exposure and prevented new ideas in the firms to be develop.
Innovation is perceived as new products or services, It may also required changes in management, business model, marketing, organizational structure, processes, products, services, supply chain or strategic objectives (Hamel, 2006). Also, performance measurement is usually operationally driven and based on hard numbers, not strategic or intangible.
It may also take up time to build these innovation and there will be risk involve in this movement even if the models have been followed so manager should always make the correct decision can consider every aspect that according to firm objective and version or so, before the change is been made. If resource or quality are not meet manager could also solving it by merging, outsource, alliance or so as other firm may have the inspiration or the innovation to create that quality or already exists in the firm.
In conclusion, these models not only able bring in the value added by innovation but also to align innovation projects with strategic objectives. Manager will able to understand investment decisions made through innovation as risk taking have a greater plan, and each employees will be treated fair and been recognized of their work as innovation comes in. While firm are able to benefit from it by having increase profits and good brand name which is priceless.