Premier, Inc. is a healthcare strategic alliance entirely owned by not-for-profit hospitals and health system organizations that operate both hospitals and other kinds of care services. Premier is the second largest of the few nationwide alliances serving not-for-profits. In 2011, they saved $4.2+ billion by improving processes and efficiencies in their care delivery system, which is the equivalent to the average annual salary of 70,015 nurse practitioners.

Premier has no problem answering the Baldrige Criteria questions in section 1.2, ‘How does your organization promote and ensure ethical behavior in all interactions?’ and, ‘How do you contribute to the well-being of your environmental, social, and economic systems?’ Premier operates its corporate headquarters in a LEED certified building; and last year it recycled nearly 150,000 pounds of paper on top of two tons of computers and electronic equipment. The organization also advocates on behalf of its members for healthcare policies that address safe and less toxic practices, including the need for Di(2-ethylhexyl) phthalate (DEHP) labeling of products and more oversight of industrial chemicals with increased disclosure and promotion of safer alternatives.

Premier uses a green leaf icon to tag “environmentally preferable contracts” from contracted suppliers in its electronic catalog for members, Supply Chain Advisor. These contracts have products or services with environmentally preferable attributes that reduce the negative impact on the quality and health of the environment and consider, for example, the product materials, potential toxicity, production, packaging, reusability, energy efficiency, disposal, nationally recognized certification, or its impact on the environment.

With core values that focus on the integrity of the individual and enterprise, generating a passion for performance, achieving innovative breakthrough opportunities, and focusing on people, Premier, Inc. is sure to maintain its position near the top, especially when it comes to such a complex alliance of hospitals and health organizations.

For more articles on healthcare and innovative excellence, read:

• At Sharp Healthcare, This Bud’s For You
• Societal Responsibility
• Designing for Innovation

Until the twentieth century, few “knowledge workers” existed in the field of managing for quality. Such workers (today often called “quality professionals”) carry out planning and analysis related to quality policy formation, goal setting, organization, performance measurement, incentives, and the like. The last century witnessed remarkable growth in the numbers of such quality professionals, beginning during the years of World War II when the War Production Board sponsored numerous (free) sources in statistical quality control (SQC). Companies that wished to apply SQC to their operations then found it necessary to create a new job category of “quality engineer” (or similar title) as a prerequisite for applying the statistical tools.

Eventually the American Society for Quality (ASQ) formalized the professional status of quality engineers by offering certificates to those who successfully passed a written examination. Such certificates then proliferated to other categories of professionals – reliability engineers, quality auditors, and still others.

During the twentieth century there also emerged the concept of “Big Q” – the idea that managing for quality extends beyond the factory; it applies also to offices and warehouses. The Big Q concept also was extended to include such broad matters as customer satisfaction, and the economics of quality. Adopting the Big Q concept broadened the scope of the quality professionals’ responsibilities.

The widespread adoption of the ISO series of standards spawned a new category of quality auditors – those who offer a service of reviewing compliance to the standards and issuing certificates of compliance. Such auditors were either self-appointed or sponsored by consulting firms or national societies for quality. In due course, efforts have emerged toward professionalizing these auditors.

An added activity started taking place in the 90s involving professionalism in the “Six Sigma” movement. (Six Sigma is essentially a new name for quality improvement.) An important feature of the Six Sigma movement is the use of facilitators, as has traditionally been done in quality improvement programs. Companies that have preferred to use the Six Sigma banner have also elected to rename the facilitators “Black Belts” (or other colors). These designations are conferred by the companies employing the facilitators, but the extent of prior training and use of examinations has been quite varied.

As of the early 2000’s, there were many categories of knowledge workers in the field of managing for quality. Each group strives for recognition as professionals. Yet there is wide variation in the extent of training undergone, experience acquired, and use of pass/fail examinations. There is also competition among the categories over jurisdictional rights.

In my view, the twenty-first century will bring important changes. We will likely witness the emergence of degree-granting college programs devoted to the field of managing for quality, and I believe we will likely witness the creation of a national category of quality professionals paralleling that of certified public accountants.

Source: Juran, Joseph M. Architect of Quality. New York, NY. McGraw-Hill, 2002.

For more articles inspired or written by Dr. Juran, please read:

• Designing for Innovation (Part one of a three-part series)
• Developing the Elements of Strategic Planning and Deployment (A two-part series)
• Remedy First, Diagnose Later?
• Building a Baldrige Community

Innovators are not always born with exorbitant talent. If you have your heart set on being the next Thomas Edison, you are probably going a bit too far. Whatever your innovation quotient is now, you can make it better with practice and by using a methodology that causes innovation to happen.

For instance, how many times do we hear, “Think outside the box”? That’s all well and good, but what box? Few of us recognize that the box is in fact ourselves. Learning to temporarily let go, be foolish for a moment, and be comfortable with ambiguity is necessary for innovation. Getting beyond our “boxed” selves is a skill that can be learned and improved with technique, practice, and courage. For example, imaging oneself as someone else and seeing everything through his or her eyes can be a great technique.

Arriving at this level of letting go will require a systematic methodology. Many methods have been used in developing simpler and better products. These design processes incorporate early involvement teams. The teams are composed of a broad spectrum of employees, customers, and suppliers who work together through a systematic process of looking and thinking outside the box to solve problems. The results are significant, and new products can be discovered.

The concept of push innovations (e.g., toys and foods) is a short-term exercise that continues to flood the market with new products. Some are good and last a long time; many are short-lived. If you are trying to innovate to solve a customer or societal problem, the outcome of a purposeful design process often leads to products that benefit society for many years. Drug development is a good example. Aspirin has been around for more than 100 years. New drugs that reduce cholesterol will also be here for decades.

Why do some products last so long and others do not? This answer lies in the methods used to design or create the innovation. Innovation requires a systematic process and set of tools to create customer-focused, need-driven designs. Designing world-class products requires gaining a clear understanding of the customers’ needs and translating those needs into services aimed at meeting them. The process goes on to design and optimize the features and then develop and execute the new designs. This process is sometimes referred to as the product or service development process, the design process, or the DFSS process.

Random, innovative ideas, no matter how clever, will not deliver economic success unless they meet a customer need better than the current method or fulfill a previously unknown or unmet need. The talented design people we have working for our organizations give us excellent designs when we specify who wants it and what it is that they want; “they” being the customers who make up a market segment.

Source: Juran’s Quality Handbook, the Complete Guide to Performance Excellence, 6th Edition

For more quality articles, please read:

• Process Management: DMAIC for Everyone
• 10 Insights into Strategic Planning
• Visionary Leadership

Things such as nuclear power, radio, phones, electricity in the home, and manned flight are certainly good examples of something that was pretty close to new under the sun. All the great, really new innovations can often be traced back to a genius, a lucky accident, or both.

We know the names of many of the geniuses – Fermi, Wright, Edison, Benz, and Ford. However, this is not an endless list, and while lucky accidents are good, they are too chancy. Type II innovation presents a better way.

Type II innovation is much more common than Type I. This second type can be reduced to three general approaches:

1. Making something that already exists larger
2. Marking something that already exists smaller
3. Combining one thing that exists with something else that exists

The simplicity of Type II is profound. It can create dramatic breakthroughs and change the way we live.  Most of what we see and consider as great innovations were derived from the three methods of Type II innovations listed.

For example, the mobile phone or PDA in your pocket was once a fair-sized wooden box on the wall.  The phone has been made smaller from the original wall model hardwired to the outside world. The phone has also been “combined” with a radio, calculator, computer, TV, and music player. The flat-screen television evolved from a device that was once considered a piece of furniture and that took up more room than an easy chair. Over time, the TV’s depth and height have been “made smaller,” and its width has been “made larger.” Add the appropriate technology, and you have your flat-screen display.

Another example is Web-based learning. Web-based learning came about when transparencies were replaced by electronic slides such as PowerPoint. This led to improved quality of presentation graphics, then added animation, placed on the Internet, with voice-over IP, and video, thus delivering Web-based learning.

The “bigger/smaller/combination” approach sounds simple when you look backward. But the trick is doing it in the present, as an innovation for the future. However, it is still much easier than becoming a genius. The good news is you can get better at Type II innovation. As good as we are today, we can get better with practice.

The next time you are in a serious brainstorming meeting and need an innovation for a new product, service, marketing strategy, or similar task, put up three new header columns, and attack them one at a time. A header is the place where you will hang your ideas. The three headers are, of course, “make it bigger,” “make it smaller,” and “combine it with.” The “it” is whatever good or service or whatever you are working on. Have fun with it. Remember not to critique or scrub the ideas until after the generation of ideas is done. Most people are surprisingly good at Type II innovation. Morph some of the wild ideas into something that is doable. The great innovator Henry Ford said, “If you think you can or can’t, you’re right.”

Source: Juran’s Quality Handbook, the Complete Guide to Performance Excellence, 6th Edition

This article is part of an on-going series on innovation.  For more on quality articles from Baldrige, please read:

• Planning or Replanning Cross-Functional Processes
• Still Passionate about Baldrige
• 6 Reasons to Revive American Manufacturing
• The Secret to Success: Implementation

Designing for customer needs frequently leads to higher-quality goods and services as well as innovative outcomes because an effective design process uncovers hidden customer needs. This discovery, and the subsequent solving of the problems that kept customer needs hidden, will lead to innovation. Designing innovative and superior quality services and products requires gaining a clear understanding of the customers’ needs and translating those needs into products and services aimed at meeting them. This information can be the driver of innovation; however, most do not recognize it as such.

Innovation has everything to do with creating something new. In competitive business situations success often comes to the best innovators. Many organizations have design and development functions that create annual plans to develop new models and new services. Sometimes these functions design the good or service internally to the organization and then look for customers to sell it to, while other innovation comes from solving societal problems. Additionally, organizations may look for customer problems to solve; as a result they create something new, something innovative. It is the latter that we have found to be the most economical and therefore provides the greatest return on its investment.

To create continuous innovation, an organization must design to meet customers’ unmet (often hidden) needs. To do this one must:

1. Capture the voice of the customers – the potential new customers or existing ones.
2. Discover hidden customers and needs. It is hidden customers or hidden needs that must be found.
3. Design solutions to meet those needs. This usually means solving a challenge or contradiction.
4. Use a systematic approach to ensure innovation happens, continuously.
5. Have tools to measure and capture data and use it to ensure that the good or service is produced efficiently.
6. Use multifunctional staff to carry out the systematic process to ensure the good or service can be produced as planned.

One can learn about innovation, which means “making something new,” by studying innovations and innovative methods from the past.

Polaroid Camera

The conventional photographic process involves exposing light-sensitive material, which in turn must be developed, fixed, and printed. The print is developed and fixed, a procedure that can take hours (or days, if the processing facility is far from the place where the photograph was taken). In 1947, a remarkable new system of developing and taking pictures was introduced by U.S. physicist Edwin Herbert Land (1909-1991). Land left Harvard after his freshman year to conduct his own research on the polarization of light. Two years later, he invented a sheet polarization filter that could be used on camera lenses to eliminate reflection and glare. In 1937, Land founded the Polaroid Corporation to manufacture and market his filters, lamps, window shades, and sunglasses. In February 1947, he introduced Polaroid instant film for use in his own Polaroid Land Camera. The Land Camera (U.S. Patent 2,543,181) was first offered for sale on November 26, 1948.

Polaroid film processes chemicals in a flat, hermetically sealed compartment attached to the photosensitive paper. A pair of pressure rollers spreads the chemicals uniformly across the paper when exposed, and the completed print is read a minute later.  In 1963, Polaroid introduced the Polacolor, a full-color film that could be processed in less than a minute.

Source: Juran’s Quality Handbook, The Complete Guide to Performance Excellence, 6th Edition

This article is part of a continuing series on innovation.  For more articles by Joseph A. DeFeo, click below:

• Developing the Elements of Strategic Planning and Deployment Pt 1 and Pt 2
• Valuing Workforce Members and Partners
• Societal Responsibility

I-SS isn’t succeeding by motivating faculty and staff alone, but instead have implemented a number of research-based best practices to raise achievement and close gaps. By implementing formative assessments, essential curriculum, and collaborative teams, a learning-centered atmosphere has developed. I-SS asked themselves questions such as, What do students need to know?, How will they learn it?, and What will we do if they already know it? Quarterly performance measures are generated based on “customer” requirements and satisfaction, stakeholder requirements, how services will be provided, and how I-SS will know if the services are operating efficiently and effectively.  When student performance does not meet targets, the gap is addressed through the systematic use of a Plan, Do, Study, Act (PDSA) cycle to identify and implement improvements.

Iredell-Statesville Schools has a drop-out rate of 2.36%, ranking it the 7^th lowest in North Carolina. However, back in 2002, before implementing the Baldrige Criteria, I-SS had a drop-out rate of 6.5%. Its overall academic ranking in the state in 2002 was 55^th; in 2010 they climbed up the ladder to 38^th. They increased the number of highly qualified teachers on staff from 6% in 2002 to 11% in 2010 (As defined by No Child Left Behind). Recently, I-SS successfully opened two early college programs, in addition to receiving full accreditation as a quality school district by AdvancED.

One of North Carolina’s strategic goals for the 2011-2012 school year is that North Carolina public schools will be governed and supported by 21^st century systems. I-SS has refined this further, aiming to maintain a top-10 rating as measured by the per pupil expenditure/academic performance composite. Specific, measurable goals like these are what will continue to lead organizations like Iredell-Statesville Schools to the top.
For more on innovative excellence, read:

• At Sharp HealthCare, This Bud’s For You
• Leading the Innovation in Aviation: Airbus, Boeing, and Embraer
• Remedy First, Diagnose Later?
• Planning or Replanning Cross-Functional Processes

Profitability is correlated in a positive way with customer loyalty. While we have confirmed this with empirical evidence for a variety of clients in a wide range of industries, it is interesting to consider why the relationship should exist. Exhibit 1 shown below summarizes the reasons. First, simply keeping a target customer longer means the cost of churn, or replacing lost business with new business, is reduced. While Exhibit 1 depicts a relationship with a single customer, the same principle applies to portions of large business customers. Time and again, we have seen companies managed for market share, which gain share only by incurring great churn. These companies tend to realize a lower average price and have a higher delivered cost than their competitors with lower rates of churn – even if the competitors have a lesser share of the market. Customer acquisition cost, while not ordinarily accounted for by the finance department, can be significant. Improving customer loyalty reduces the significance of this cost of poor quality.

A variety of extra “chunks” of value accrue as a customer’s loyalty level increases. These are shown in Exhibit 1: profit from referrals; profit from price premium; profit from broadened purchasing; profit from co-development of products & services and profit from reduced operating costs. In theory, the relative size of these value drivers can be measured. In practice, we espouse only some simple analysis to make the case for customer loyalty management, and tend to focus our efforts and the attention of management on the practical aspects of managing for loyalty. As has been mentioned, improvements as modest as five percentage points in loyalty rate often result in customer profitability increases of over fifty percent.

Exhibit 1

For additional information regarding customer loyalty research, please contact the author at tomhuizenga@baldrige.com

For additional reading:

• Quality and Customer Loyalty Goals
• At Sharp HealthCare, This Bud’s For You
• What Do Your Customers Require?