International Journal of Quality & Reliability Management

Quality revolution: leading the innovation and competitive advantages

M.A. Berawi
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To cite this document:

M.A. Berawi, (2004),"Quality revolution: leading the innovation and competitive advantages", International
Journal of Quality & Reliability Management, Vol. 21 Iss 4 pp. 425 - 438
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QUALITY AND RELIABILITY CORNER Quality

revolution
Quality revolution: leading the
innovation and competitive
425
advantages
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Received October 2002

M.A. Berawi Revised November 2003
Civil Engineering and Construction Management Department, Accepted November 2003
Oxford Brookes University, Oxford, UK

Keywords Quality, Value analysis, Knowledge management, Industry competitiveness,

Innovation, Competitive advantage
Abstract Knowledge management (KM) addresses the critical issues of organizational
adaptation, survival and competence in a rapidly evolving environment. KM embodies
organizational processes that seek a synergistic combination of the data and information
processing capabilities of information and communication technologies (ICT), and the creative and
innovative capacity of human beings to improve ICT. In that role, knowledge management has the
capacity to improve quality management and avoid or minimize losses and weaknesses that result
from poor performance as well as increase the competitive level of the company and inability to
maximize its survival potential in the global marketplace. To achieve quality, all parties including
the clients, company consultants, contractors, entrepreneurs, suppliers, and governing bodies (i.e.
all involved stakeholders) must encourage collaboration and commitment to quality. Design-based
organizations have to be quality driven to support healthy growth in today’s competitive market. In
the march towards globalization (i.e. the one world community) as well as local industries
comprising many companies, their design-based organizations need to have superior quality
management and knowledge management capabilities to anticipate changes. Intelligence and
knowledge is a form of strategic capital, which can be cultivated, created, stored, managed,
retrieved and measured to give competitive advantage. To anticipate the needs of the marketplace,
a new system that is called quality value model (QVM) is proposed. QVM is a combination of
communication and information technologies (ICT) as well as creative and innovative capabilities
of human beings to meet challenges and to develop high-quality products. Quality is a reflection of
the properties in a product that customers use to value and evaluate its economic worth.
Furthermore, the mathematical technique within QVM calculates input-factor changes within the
product. This enables companies to be more responsive and aids prediction in respect to change
and the management of decision uncertainty.

Introduction
The combination of intelligence and knowledge is a key factor in the move to
globalization. Knowledge management involves the identification and analysis of
available and required knowledge, and the subsequent planning and control of actions
to develop knowledge assets so as to fulfill the organizational objective of profitability
through higher quality levels as recognized by customers (Berawi, 2002a). Knowledge International Journal of Quality &
assets comprise the knowledge regarding markets, products, technologies and Reliability Management
Vol. 21 No. 4, 2004
organizations that a business owns or needs to own and that enable the enterprise to pp. 425-438
q Emerald Group Publishing Limited
generate profits. High-quality goals for products, along with a good means to schedule, 0265-671X
track and predict costs are the mechanism needed to manage the design from concept DOI 10.1108/02656710410530118
 IJQRM to delivery (Abdul-Rahman and Berawi, 2001). Products that are completed on time
and in budget are important parameters for success and quality through QVM. The
21,4 following are five definitions and perspectives on quality (Garvin, 1998):
(1) Transcendent: “Quality is neither mind nor matter, but a third entity
independent of the two . . . even though quality cannot be defined, you know
what it is” (Pirsig, 1974).
426
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(2) Product-based: “Quality is based on the presence or absence of a certain

attribute” (Abbott, 1955).
(3) Manufacturing-based: “Quality is conformation to requirement” (Crosby, 1979;
Ishikawa, 1985).
(4) User-based: “Quality means fitness for use” (Juran, 1974; Deming, 1982).
(5) Value-based: “Quality means the degree of the excellence at an acceptable price
and the control of variability at an acceptable cost” (Broh, 1982).

QVM – adding value through innovation and change

The main objective of any management activity is to improve the performance of a
company or business to meet strategic objectives. This paper describes a model that
can be used to move closer to an elegant solution. This is a tool for management that
enables them to anticipate the direction in which competitive advantage through
design should head. Therefore, companies will be empowered to seek new design
advantages proactively. As customers control revenue the management of quality is
the means to influence the “value for money” comparison in the purchase decision.
What is more, as levels of global competition increase, companies must actively
manage their external and internal perceptions by engaging in three areas of activity:
(1) Adjusting external perceptions to reflect innovativeness and creation.
(2) Managing internal capabilities by the appropriate use of ICT and the media and
the company’s knowledge and ability.
(3) Changing the reality, in terms of behaviors, actions, and symbols (supporting
society and environment culture).
Companies constantly make their commitment to innovation visible through actions
that reinforce the need to outperform what already exists. They highlight the
importance of having experienced, effective and capable human resources and levels
of performance that enable development, improvement and innovation in the move
towards globalization (Abdul-Rahman and Berawi, 2002). A vision for a company’s
future is identified through careful analysis of the system in which the firm exists
and the ability of the company to achieve future growth (Woodhead and McCuish,
2003). The key success factors are the specific indicators that are considered reliable
measures. They are determined by an analysis of the ability to meet global
competition with rapid innovations that reduce the new product development
duration of industrial products and projects (Berawi, 2002b). The alternative
approach is to be a trend-setter rather than a follower, but the company must know
how to play and change its role by using the talents of various cultures and
combinations of competition and cooperation. Deploying technology to successfully
organize and share knowledge will remain important. A knowledge development
 cycle in an organization consists of knowledge creation, knowledge adoption, Quality
knowledge distribution, and knowledge review and revision phases (Bhatt, 2000).
The challenge for a company is to create an environment that demands and allows
revolution
generation and processing of information continually as well as facilitating
knowledge creation and utilization. This is especially true for firms operating in
highly competitive environments (Nonaka and Takeuchi, 1995; Malhotra, 2001).
“Value added” in most industries today is in the form of knowledge, not stuff. The 427
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ability of a company to adapt to changes at the right time is important for a company
to survive and maintain its competitive advantage. What this paper offers is a tool
that will help co-ordinate knowledge. The optimization of intangible assets, such as
in-house knowledge are the “why” and “how” the company makes progress towards
higher level of quality. There is a direct and different influence on design
considerations and market analysis to achieve higher quality. Companies need
superior quality to face global competition, yet many classical quality management
theories do not promote innovation and change in a dynamic fashion but rather as
incremental and continuous tweaks. The attitude to work in businesses and
industries drives the attitude to design and the search for innovation. Quality
management in business is a system that deals with the procedures of obtaining
quality levels that perform intended functions, and to do so within the various
human, social, and environmental requirements and constraints.

Mathematical model for QVM

Given we are not so much interested in achieving a comparable level of quality as offered
by rivals, we now explain how we can anticipate quality improvements that enable
competitive advantages. Our goal is to identify these factors that really make a difference
so that we can ignore insufficient ones. The success of a product can be evaluated by the
degree to which it meets or exceeds the customer’s requirements. Achieving this requires
not only the resources of a number of organizations and individuals, but also successful
interaction amongst those parties. The concept of QVM has arisen in recognition of the
growing customer use of the Internet to source products and the reducing knowledge
producers have of what rivals offer. The basic idea for a mathematical approach to an
optimal design is to increase all of the product’s strength factors and at the same time
minimize all of its weaknesses. The QVM concept can be applied to all kinds of product
and business process innovations as they are essentially different forms of design. The
product needs an optimal design and allows us to consider “what is” as well as “what
could be” (Ilyas et al., 2001). The quality of a product or process is measured in terms of
its characteristics or properties that customers’ value. Weight determined by customers
via market research in actual episodes using paired comparison technique (Woodhead
and Downs, 2001) allows the explicit link to the customer’s preferential power over
revenue streams to be included in our contemplation.
Let me explain the funding theories and move forward to a more detailed
explanation of the model. As customers evaluate the worth of an offer the
manufacturer must consider the following:
.
the ability to sell is dependent on the customer’s perceived worth; and
.
the customer’s perceived worth is a product of the amount of quality in a product
in relation to the price.
From this point, we can show the trends shown in Figure 1.
 IJQRM
21,4

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Figure 1.
Customer-perceived worth
and ability to sell

Given price is set by the marketplace, if we hold a view of perfect knowledge, then the
task before the manufacturer is to increase quality whilst holding price in a
predetermined relationship. Further it is the aim of this paper to enable the value of
rival offerings to be positioned in relation to new product development. By overlaying
two comparable offerings to the market place we can establish the point at which
customers would be indifferent as shown in Figure 2. By accepting point O as the
minimal quality level our new product must achieve allows us to consider the range of
quality it is within our control to deliver.
Figure 3 uses an influence diagram to make our structure of the interrelationships
explicit. In this model we are overwhelmed by variables some of which may turn out to be
insignificant. The quality of a product (Q) is a result of the quality of its internal properties
(q) that customers use to evaluate value for money (i.e. customer’s perceived worth). For
example the difference between a luxury car and an economy car is to be found through
the relationship between price and the quality of secondary properties such as upholstery,
comfort, acceleration and so on. Each property’s quality is also the result of various
influential factors (x) such as strength, color, texture, smell, etc. These influential factors
are affected by relationships to other moderating variables (v) such as perishability,
unwanted heat gains, poor color stability. As such we can set about searching for
advantage and direct our new product development process if we can anticipate which
aspects of design are more attractive to customer-perceived worth. This will now be
explained through a mathematically based approach named “quality value model”.

Figure 2.
Customer’s point of
difference
 Quality
revolution

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Figure 3.
The quality value model

A. Deterministic model
To begin our explanation of how we seek to measure quality we start with a
deterministic approach that will subsequently be changed into a probabilistic one. Our
experimentation starts with the properties of a product:
Q ¼ fq1 ; q2 ; q3 ; . . .; qn ; . . .; qN }; ð1Þ
where:
qn = nth property of product;
N = number of properties considered.
Equation (1) shows quality as set of all properties and here we allow for a greater
number of properties than are shown in the influence diagram. A product’s properties
are the result of control factors within:
qn ¼ {x1 ; x2 ; x3 ; . . .; xn ; . . .; xN }; ð2Þ
where:
x = customer recognition of feature or function;
xn = ith control factor;
N = number of control factor;
xi min , xi , xi max
= the performance range of x.

A single property (q) within a product is the realization of phenomena that exist
between upper (xi_max) and lower boundaries (xi_min). These phenomena are an
aggregation of relationships between other variables (v) that can be positive or
negative. These other relationships are caused by variables such as ambient
temperature, pressure, reliability, and are termed “moderating attributes” and
 IJQRM modeled as v in the influence diagram in such a way that another boundary set is
21,4 established:
xi ¼ v1 ; v2 ; v3 ; . . .; vn ; . . .; vN }; ð3Þ
where:
430 vn = nth moderating attribute;
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N = number of moderating factor;

Vi unfav , Vi , Vi fav
= the range of effect caused by moderating variables.
Given some attributes are qualitative and others such as weight are in different units
we need to translate the attributes into a common format (Woodhead and McCuish,
2003). By positioning statements that correspond to percentiles makes this easily
achieved. From equations (1)-(3) we can derive a quality target function that has
mathematically represented relationship, which we want to achieve as:
Q
¼ Opt ðX; V Þ: ð4Þ
In other words, an optimal quality is achieved when a balance is found for the
properties within the boundaries of control and moderating factors. The value before
optimization is used to determine which factors are influential to the performance
characteristic of interest given not all factors will influence quality. Hence:
X inf ¼ X and V inf # V ; ð5Þ
where:
Xinf = number of influential control factors;
Vinf = number of influential moderating factors.
Then formula (4) may be rewritten to show that we are only interested in influential
control and moderating factors, and this becomes:
Q
¼ OptðX inf ; V inf Þ: ð6Þ
The mathematical model for one quality characteristic (i.e. one property) and three
influential control factors that leads to a seventh permutation may be written as:

q ¼ fa þ axinf inf inf inf inf

1 þ ax2 þ ax3 þ ax1 x2
ð7Þ
þ axinf inf inf inf inf inf inf
1 x3 þ ax2 x3 þ ax1 x2 x3 }:

We now move on to consider two potential designs (AB) as shown in Paretto’s area in
Figure 4. A and B represent the upper and lower boundaries for hypothetical optimal
solutions that reside on the boundary line between these two points. In this scenario we
define optimum as the minimization of both q1 and q2 (see point C). Due to our goal here
to maximize quality and minimize cost and we are considering levels to set for two
properties. In other situations such as if q1 were “design style” and q2 were “design
cost” we might seek to maximize q1 and minimize q2. The important point here is that
 Quality
revolution

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Figure 4.
Paretto’s area (AB) for two
quality characteristics, q1
and q2

we accept the relationship being considered is with respect to overall quality. Figure 4
shows that design solution C is better than the design solution D because point C
(qC1 ,qC2 ) , D (qD1 ,qD2 ), i.e. qC1 , qD1 and qC2 , qD2 .
So we now have a deterministic way of finding an optimal level for properties.

B. Probabilistic model
We now build on the deterministic model by introducing probability. Equations (8) and
(9) are adaptations of equations (1) and (2). The reason we do so is to develop a means
of predicting sources of advantage from a given product design:
Q ¼ fPðq1 Þ; Pðq2 Þ; Pðq3 Þ; . . .; Pðqn Þ; . . .; PðqN Þ}; ð8Þ

PðqÞ ¼ fPðx1 Þ; Pðx2 Þ; Pðx3 Þ; . . .; Pðxn Þ; . . .; PðxN Þ}: ð9Þ

The optimal value of xi is determined by the optimization of the set v (i.e. moderating
factors that detract value). This is defined by:
PðxÞ ¼ fPðv1 Þ; Pðv2 Þ; Pðv3 Þ; . . .; Pðvn Þ; . . .; PðvN Þ}: ð10Þ
Equation (10) examines the effects of the factors and allows a company to predict the
optimal value of the systems performance where P is assumed to be between low and
high levels of performance in one property. The predicted values of properties assume
a linear relationship in which a customer aggregates benefits in the value for money
evaluation as shown in equation (11):
Y opt ¼ ðe0 þ e1 x1 þ e2 x2 þ e3 x3 þ . . . þ en xn Þ=N ; ð11Þ
where:
e0 = sum of all responses;
en = effect of nth factor;
xn = coded level of nth factor;
N = number of test;
n = number of factor.
 IJQRM From equation (11) we can calculate the change in the response value with equation
21,4 (12) by:

Xn new ¼ ½r 2 ðr þ þ r 2 Þ=2=½ðr þ 2 r 2 Þ=2; ð12Þ

where:
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Xn_new
= new nth factor coded level;
r = new level factor natural value;
r+ = new high level factor value;
r2 = new low level factor value.
The above equations will shortly be demonstrated through a case study.
Implementation. Specifications and parameters were identified as having most
effect on the quality and performance of a product. If the number of the factors is two to
three, four tests are required. If the number of the factors is four to seven, eight tests are
required. If the number of the factors is eight to 15, 16 tests are required, and so on. The
number of tests required is thus twice the lowest number of factors being considered.
Furthermore, this paper describes a business performance evaluation model and
discusses how quality value model (QVM) can be used to define the best use of
resources to meet the overall business strategy and deal with change and uncertainty
within the venture. Tables I and II use three input factors, namely, material costs (f1),
man-hours (f2), and number of sub-contractors (f3). We can utilize the intelligence and
knowledge based on past experience and experiment as input factors in QVM. The
result aims to achieve higher quality, profit and reduce schedule. The mathematical
technique in QVM calculates for any input factor changes within the project. This
enables companies to respond more quickly because of better ability to predict change
and manage decision uncertainty.

Test f1 f2 f3 Response

2 2 +
1 (a) (b) (c) m
+ 2 2
2 (d) (e) (f) n
2 + 2
Table I. 3 (g) (h) (i) o
The calculation of + + +
response 4 (j) (k) (l) p

Factors Minimum/low level (2) Maximum/high level (+)

Cost material 10 million 40 million

Table II. Man hours (schedule) 50 days 300 days
Input factors Number of sub-contractors 5 sub-contractors 20 sub-contractors
 Case study with three parameters input Quality
If the number of any type of factor, e.g. moderating or control factor, is two to three, the
calculation of the response is described as shown in Table I.
revolution
This assumes an interrelationship between the factors which means if one changes
the others must also change. Calculation of the effect of the factors (e) is defined by:
e0 ¼ m þ n þ o þ p;
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e1 ¼ 2m þ n 2 o þ p;
e2 ¼ 2m 2 n þ o þ p;

e3 ¼ þm 2 n 2 o þ p:

The optimum response using equation (11) is:

Y opt ¼ ðe0 þ e1 x1 þ e2 x2 þ e3 x3 þ . . . en xn Þ=N :
We will now enter data to examine the approach in operation.
Input. Describe value of a whole project experienced or predicted (see Table II). The
objective is to reach high quality, profit and as short a time as possible for the project
(see Table III). From Tables I-III, the optimum levels and importance of the factors can
be determined in order to see the improvement of quality, profit and time and if there
are any changes and uncertainty in the input factor in the following cases.
Objective function. Objective function 1 is to maximize profit. Calculation of the
effects of the factors is as follows:
e0 ¼ 7 þ 4 þ 6 þ 2 ¼ 19;
e1 ¼ 27 þ 4 2 6 þ 2 ¼ 27;

e2 ¼ 27 2 4 þ 6 þ 2 ¼ 23;
e3 ¼ 7 2 4 2 6 þ 2 ¼ 21:

It is used in Table IV to determine the most important factors from data above.

Experiment (test) f1 f2 f3 Profit (million) Quality (%) Time (months)

1 2 2 + 7 65 40
2 + 2 2 4 75 30 Table III.
3 2 + 2 6 55 25 Results from past
4 + + + 2 80 20 experience

Importance range Factor Effect (e) Optimum level

1 f1 27 10 million Table IV.

2 f2 23 50 days The most important
3 f3 21 5 sub-contractors factors on profit
 IJQRM Table IV shows that the most influential factor on profit output is material costs,
followed by man-hours and the number of sub-contractors. The optimum response
21,4 using equation (11) is:

Y opt ¼ ðe0 þ e1 x1 þ e2 x2 þ e3 x3 þ . . . en xn Þ=N ;

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where:
Yopt = profit optimization;
e = effect of the factors;
x = boundary level from Table I.
To predict the result from the test 2 and compare with the historic data (see Table III),
then:

Y optð2Þ ¼ 19 2 7x 2 3x 2 1x=4
¼ 19 2 7ðþ1Þ 2 3ð21Þ 2 1ð21Þ=4
¼ 16=4
¼ 4 million

The value of prediction is the same as the historic value in Table III, which processes
the validity of the equation.
Next we will predict the optimum level for profit that is achievable.

Y opt ¼ 19 2 7ð21Þ 2 3ð21Þ 2 1ð21Þ=4

¼ 30=4
¼ 7:5

The value of the optimum profit output level that can be achieved in this project is 7.5
million based on the assumed constraints.
Now we consider the effect of uncertainty and predict based on changed factor. If
there are any changes bringing uncertainty to the input factor, in this case the value of
factor 2 changes to 100 days, the transformation from previous value for factor 2 gives:

Xn new ¼ ½r 2 ðr þ þ r 2 Þ=2=½ðr þ 2 r 2 Þ=2;

X ¼ ð100 2 ð300 þ 50Þ=2Þ=ð300 2 50Þ=2

¼ 275=125
¼ 20:6

Using this one gets:

 Y ¼ 19 2 7ð21Þ 2 3ð20:6Þ 2 1ð21Þ=4 Quality
¼ 28:8=4 revolution
¼ 7:2

When factor 2 changes to 100 days, the profit output reduces from 7.5 million to 7.2
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million. By understanding and managing the factor changes and uncertainty in

outcome, the company can predict the sum of profit that can be obtained through the
manipulation of factors. Using probability as in equations (8)-(10) we can assess design
targets a priori.
Quality. We now apply the same logic to quality (see Table I). Here quality is
measured in percentiles of customer satisfaction gleaned from market research.
Calculation of the effects of the factors is:
e0 ¼ 65 þ 75 þ 55 þ 80 ¼ 275;
e1 ¼ 265 þ 75 2 55 þ 80 ¼ þ35;
e2 ¼ 265 2 75 þ 55 þ 80 ¼ 25;
e3 ¼ 65 2 75 2 55 þ 80 ¼ þ15:

It is used in Table V to determine the most important factors from data above.
Table V shows that the most influential factor on profit output is material costs,
followed by the number of sub-contractors and finally man-hours.
We will now predict the optimum level of quality:
Y opt ¼ 275 þ 35ðþ1Þ 2 5ð21Þ þ 15ðþ1Þ=4
¼ 330=4
¼ 82:5 percent

The value of the optimum quality output level that can be achieved in this project is
82.5 percent.
We will now consider the sensibility to change and its impact on quality. If there are
any changes bringing uncertainty to the input factor, in this case the value of factor 1
changes to 20 million, the transformation from previous value for factor 1 gives:
X ¼ ð20 2 ð40 þ 10Þ=1Þ=ð40 2 10Þ=1
¼ 230=30 ¼ 21

Importance range Factor Effect Optimum level

1 f1 +35 40 million Table V.

2 f3 +15 20 sub-contractors The most important
3 f2 25 50 days factors on quality
 IJQRM We will now use this quality optimum equation to get:
21,4 Y ¼ 275 þ 35ð21Þ 2 5ð21Þ þ 15ðþ1Þ=4
¼ 260=4
¼ 65 percent
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When the changes from factor 1 change from 40 million to 20 million, the quality
output will reduce from 82.5 percent to 65 percent. This illustrates the difference
between quality and value and the relationship between product, purpose and
cost.
Time constraint. Objective function 1 is to improve time constraint. Calculation of
the effects of the factors is:
e0 ¼ 40 þ 30 þ 25 þ 20 ¼ 115;
e1 ¼ 240 þ 30 2 25 þ 20 ¼ 215;
e2 ¼ 240 2 30 þ 25 þ 20 ¼ 225;
e3 ¼ 40 2 30 2 25 þ 20 ¼ þ5:

It is used in Table VI to determine the most important factors from data above.
Table VI shows that the most influential factor on profit output is man-hours,
followed by material costs and the number of sub-contractors.
We will now predict the optimum level of time:
Y opt ¼ 115 þ 15ð21Þ þ 25ð21Þ 2 5ðþ1Þ=4
¼ 70=4
¼ 17:5

The value of the optimum time output level that can be achieved in this project is 17.5
months.
We will now consider the sensibility to change and its impact on time. If there are
any changes bringing uncertainty to the input factor, in this case the value of factor 3
changes to ten sub-contractors, the transformation from previous value for factor 3
gives:
X ¼ ð10 2 ð20 þ 5Þ=3Þ=ð20 2 5Þ=3
¼ 1:66=5
¼ 20:332

Importance range Factor Effect Optimum level

Table VI. 1 f2 +25 300 days

The most important 2 f1 +15 40 million
factors on quality 3 f3 25 5 sub-contractors
 We will now use this time optimum equation to get: Quality
Y ¼ 115 þ 15ð21Þ þ 25ð21Þ 2 5ðþ0:332Þ=4
revolution
¼ 73:35=4
¼ 18:33
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When the changes from factor 3 change from 20 sub-contractors to ten sub-contractors,
the time schedule output will change to 18.33 months.

Conclusion
The QVM in this paper is offered as a means to help a company to face the
globalization and one world community. QVM produces a synergy between technology
and behavioral issues and human innovation that is necessary to compete and survive
in the challenging global marketplace of the new world. The optimization of intangible
assets, such as in-house knowledge are the “why” and “how” the company makes
progress towards high quality. The basic idea for a mathematical approach to an
optimal design is to increase all of the product’s strength factors and at the same time
minimize all its weaknesses. Furthermore, the mathematical technique in QVM also
calculates for any input factor changes within the project. This enables companies to
be more responsive and predictable in respect to change and the management of
decision uncertainty. Once having set up the model it becomes a routine simplex
process to establish the optimal levels in individual qualities to maximize the quality.
Therefore, the concept of QVM has arisen to ensure that companies can plan their
quality improvement, anticipate their rivals’ development plan and finally develop
competitive advantage by better knowledge management.

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