Quality Management
A. BLANTON GODFREY

The hottest topic in business today is e-commerce. Every initial public offering of a company whose name ends in .com seems to take off. Internet company stocks trade at up to 240 times revenues, not profit, which many of these companies have never made. Recently, the board of directors of two large companies, Compaq and Borders, removed their chief executives because they didn't have viable e-commerce strategies.

The proponents of electronic commerce and the Internet boldly state that the online revolution will dwarf the industrial revolution's impact on society. The detractors compare the Internet stock mania to the tulip mania in 17th century Holland and predict the bubble will soon burst. The truth probably lies somewhere in the middle, but it is increasingly clear that e-commerce will transform industries in ways far beyond our imaginations.

In an in-depth interview in the April 26/May 3, 1999, New Yorker, Mary Meeker, perhaps the leading e-commerce guru in the financial world, presented her view of the impact of this revolution on business. Meeker states that only those who offer superior quality in products and services will survive. Only those Internet companies that build up a base of tens of millions of satisfied customers will be able to make money, says Meeker. But those that do survive will become the giant corporations of the future.

Unfortunately, many of the new Internet-focused businesses have no clue about the basics of quality management. Anyone who has done significant business with these companies has found just how embryonic their quality systems (if any) are. We are entering an entirely new world of quality management. Fortunately, many of the concepts and tools we need have already been developed for other applications.

One of the most obvious needs is information quality. The Internet runs on information, and the customer supplies much of the needed information. Dell Computer's well-documented success provides good benchmarks. By focusing on informed buyers rather than on new computer users, Dell has been able to provide an intelligent Web site that allows customers to design their own computers. Customers select components, review prices, make their own trade-offs between price and features, and place the order. At last report, Dell was selling $10 million worth of personal computers a day through its Web site.

Companies like Dell face formidable quality challenges. Scheduling, production cycle times, supplier partnerships, and shipping and service contracts must be managed far better than by other companies with far slower operating environments. If Dell processes the customer's request incorrectly, the wrong product gets manufactured and shipped.

To manage an online business such as Amazon.com, with its millions of book titles and compact discs, requires supplier partnerships beyond what most companies have ever dreamed. A quick visit to Amazon.com's competitors' sites, especially those of the classic booksellers or publishers, reveals how wide the gap in understanding the new quality imperatives is. Many of these sites list incorrect information, present users with a clumsy and hard-to-use interface, utilize complicated ordering procedures and fail to keep promises. They operate in the fast-moving new cyberworld with supplier relationships, shipping procedures and billing processes designed for a far different time.

In a world where customers can compare prices, quality and service offerings from several competitors in a matter of minutes, companies are rethinking their entire quality strategy and quality systems. It is not enough to take an order and pass it off to the supplier or a distributor; the company must manage the entire process to assure its promises are met. When a business partner fails, the e-commerce company must quickly correct the problem. One remarkable example comes from a friend's experience with Dell. She ordered a laptop computer and was promised delivery prior to her return to Germany. When the package delivery service delivered her computer to the wrong address, Dell didn't hesitate. Dell assumed total responsibility for the shipping error, manufactured a new computer and sent it overnight to her.

My wife's recent experience with a high-quality household and kitchen products company's site runs counter to my friend's experience with Dell. She decided not to submit her credit card number when she noticed that the site wasn't secure. Unfortunately, the company had already grabbed her card information. My wife called and canceled her order, but has already received three replicates of the canceled order. She isn't sure how to stop them. She will never do business with this site again.

Clearly, e-commerce will be a major business strategy of many companies in the near future. But many will fail because they don't realize the new demands on their quality systems and won't make the changes necessary to manage in this highly competitive world.

About the author

A. Blanton Godfrey is chairman and CEO of Juran Institute Inc. in Wilton, Connecticut. He is the co-editor of Juran's Quality Handbook, Fifth Edition, which was published in March of this year. Special copies signed by both Godfrey and Joseph M. Juran are available from Juran Institute and may be ordered at www.juran.com .

©1999 Juran Institute. For questions, comments or permission to reprint, e-mail agodfrey@qualitydigest.com .