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Guest post by: Glen Morris Become an Author

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In July 2007, for the first time US automakers captured less than a 50% share of the US domestic market. While this event made the news, what was largely left out of the story was that the American car manufacturers were out performed because Japanese manufacturers used innovative management processes and procedures that American car makers knew about, but largely ignored. Ironically, these advanced management techniques were developed in the United States by a man still unknown to much of the American business community, W. Edwards Deming.

Considering how bombed out the Japanese manufacturing infrastructure was at the end of WWII it's truly remarkable that Japanese industry achieved such success in so little time. By 1980, only 35 years after the war's end, the Japanese were making high quality cars and exporting and selling them all over the world. If there is a single reason for their success it is that they adopted the advice of American quality guru W. Edwards Deming.

At the end of WWII Deming was hired by the US Army to help the Japanese conduct a census using statistical sampling techniques he had helped develop for the US government. Deming had also used sampling techniques to improve the quality of American industrial products during the war, a fact not lost on the Japanese. After the end of the American occupation of Japan, the Japanese Union of Scientists and Engineers (JUSE) invited Deming back to help rebuild Japanese industry. They listened to his ideas, tried them, and had such success that Deming was awarded Japan's Order of the Sacred Treasures, Second Class, for his contributions to Japan's industrial rebirth.

Deming told the Japanese they could achieve quality, and market share, by using statistical analysis to constantly refine business processes. The Japanese had nothing to lose, and it was easy for them to adopt Deming's methods because they not only had to rebuild their factories from scratch, they also had to rebuild their way of managing their businesses from scratch.

Deming believed the way to achieve a high quality standard is to reduce variation, and variation is reduced by focusing on the quality of the business processes of a company, and not the product itself.

Deming classified quality issues into two categories. The first category involved QA issues caused by isolated problems in an otherwise adequate system, and the second category of QA issues were caused by a problem with the process itself. Being able to tell the difference between the two was essential to continued improvements in overall quality, and business processes.

To continually refine business processes Deming's used a method that became known as the Deming Cycle, though the method was actually developed by his mentor Walter Shewhart, a Bell Labs physicist. The Deming Cycle consists of the phases: plan, do, check, act and analyze. As one cycle ends, the final analysis is used as the foundation for planning in the next cycle.

Deming also created what he called The System of Profound Knowledge, which consists of four parts:
Appreciation of a system: understanding the overall processes involving suppliers, producers, and customers (or recipients) of goods and services;
Knowledge of variation: the range and causes of variation in quality, and use of statistical sampling in measurements;
Theory of knowledge: the concepts explaining knowledge and the limits of what can be known;
Knowledge of psychology: concepts of human nature.
The System of Profound Knowledge was Deming's way of applying what he called the 14 Points for Management. Here are a few of them:
Create constancy of purpose for the improvement of products and services, with the aim to become competitive, stay in business, and provide jobs.
Adopt a new philosophy of cooperation (win-win) in which everybody wins and put it into practice by teaching it to employees, customers and suppliers.
Cease dependence on mass inspection to achieve quality. Instead, improve the process and build quality into the product in the first place.
Drive out fear and build trust so that everyone can work more effectively.
Break down barriers between departments. Abolish competition and build a win-win system of cooperation within the organization. People in research, design, sales, and production must work as a team to foresee problems of production and use that might be encountered with the product or service.
Eliminate slogans, exhortations, and targets asking for zero defects or new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force.

From Deming's point of view, American's quality problems are due to senior management's focus on short term profits at the expense of long term growth and innovation. The interests of shareholders are put above the interests of consumers, and quality along with market share suffers as a result.

So far, most American businesses have not understood this, and placed the blame anywhere but on management. Initially the American car manufacturers blamed the Japanese car manufacturers success on lower wages paid Japanese workers, and when wages achieve parity, they shifted blame to the fact the Japanese had newer factories, which also proved incorrect after new American car factories were built with only limited success. The fundamental fact was that the Japanese car companies were better managed.

In the late 1970s, American car manufacturers “discovered” how Deming had helped Japanese industry recover and GM and Ford began to apply some of the Deming philosophy. Though they made an effort to adopt Deming's approach, they were slow and not as committed, and they paid a price for this.

The current dominance of the American domestic car market by foreign owned companies should come as a wake up call to all American businesses. Something is wrong with the way most American businesses are managed, and if some fundamental changes aren't made soon, America is likely to lose more than just the car market.

Note: Though Deming died in 1993, fortunately his life and ideas are well documented. For an overview of his ideas read about him online at Wikipedia. A good introduction is the book “The Man Who Discovered Quality,” by Andrea Gabor.

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