A Business Model Approach to ISO 9000 Implementation

---Using Virtual Reality to Compress the Learning Curve

John A. Keane, Ph.D.

The Experience Bottleneck In working with companies registering, or considering ISO 9000 registration, understandably, we find few have much experience with this relatively new standard. Even with expert advice, there are implementations where the full benefits of ISO 9000 are not achieved. This should not be surprising. People learn best by doing. Even the most articulate consultant/teacher cannot substitute for hands-on experience.

It simply has not been possible for everyone to get the requisite experience in the relatively short time that ISO 9000 has been used. As time goes on and experience builds, the situation will improve. Few companies today have either spare time or money to invest in a prolonged learning process, even though they see that ISO 9000, as well as providing assurance in the procurement of goods and services, helps to provide better management of the business.

Contributory Negligence: Low Expectations
Adding to the problem of lack of experience is the fact that ISO 9000 is not infrequently undertaken to satisfy customers requirements for supplier qualification. In these cases, the effort to become certified is often viewed by company executives as a cost of doing business rather than an investment for improved quality. Henry Ford said: "Whether you think you can or think you can't, you're right." Without the expectation of a return on investment, it is unlikely one will be obtained.

How do we cope with the dual problems of lack of experience and lack of understanding?

[Sometimes] Simulation Is The Best Teacher Astrophysicists use simulation to compress 15 billion years to 15 hours of computer time. Simulation gives you an opportunity to do things you can’t do in real life, or don’t want to do. In one Apollo 13 scene, the crew just finished a grueling day of reentry practice in a capsule simulator. Commander Jim Lovell says "OK. We've been incinerated 17 times, lets go out and have a couple of beers." Not likely in real life. Foutunately, simulation is not real life.

While you can't expect to fly a moon mission after only working with a reentry simulator, you do gain insights into control and navagation aspects otherwise only obtainable through expensive, and potentially hazardous, capsule flying. In real life companies go bankrupt and people lose their jobs. Simulations limit losses to virtual dollars. So you don’t have to be a rocket scientist to have a use for simulation.

Executives Get Virtual Experience at B Schools
In the 1960's, Carnegie Mellon University developed "The Management Game", providing hands-on experience running a virtual company in a compressed time frame using computer simulation. This gave executives insights about company performance when certain decisions were taken.

Today, graduate MBA programs routinely use "games" in which future managers can allocate resources [advertising, R&D, production capability, et. al.] and immediately see the results of these actions. Key advantages of simulation are:

• Time is compressed from years to hours, and
• Only virtual jobs/money are lost.

This enables participants to try, and try again, learning from past mistakes what will and will not succeed. The investment is only a few hours of time, in contrast to millions of dollars and years of effort for a single try running a real company.

Practice ISO 9000 in a Virtual Factory
We reasoned that if teams within companies could try different quality systems in a simulated environment, the success rate, when the actual quality system is implemented, would improve. With this objective in mind, we built a virtual factory which runs on a desktop computer. A key requirement of the model is representing the interrelationships of quality considerations and business aspects. This business/quality model allows executives [and future executives] to allocate quality resources and see the effects of their decisions on the performance [sales and profits] of the virtual company. This is a straight-forward exercise of discovering how to "do the right things right", and finding out why "There is a place for everything and everything in its place."

How The Virtual Factory Works
The factory simulator is an extension of the MBA gaming concept to include: materials flow; quality management; consumer responses; business interrelationships; stock market reactions to performance; and other aspects of real life.

Materials are purchased from suppliers, processed in the plant and sold to consumers. Along the way, defects occur at various stages in the materials flow process. A quality system, consisting of zero or more ISO 9000 subsystems, can be installed to manage the quality of the product. Consumers who receive defective products return them for refunds and possibly migrate to a competitor. Based on consumer demand, sales increase or decrease creating profits or losses for the company. The sales and profit performance of the company is reflected in the stock price.

Externalities such as labor rates, market growth, consumer sensitivity, et. al. can be parametrically set to create a realistic environment. Decisions can be made as to quality systems components installed, overtime commitments, plant capacity, et. al. The simulation runs the plant for a virtual month under the specified conditions and the results are displayed in the form of graphical trends, standard reports and spreadsheets. New choices can be made and the model run for another virtual month [10 seconds in real time on an Intel 486 computer]. The process continues until the company goes bankrupt, or until eight virtual years of successful operations have passed.

Testing The Concept
Last summer we gathered 15 executives from service as well as manufacturing firms in a workshop and grouped them into five teams of three people. Each team had a notebook computer [486 or faster] and a copy of the User's Guide. The team assignment was to successfully [profitably, and with rising sales] implement a quality system under budgetary constraints. The quality system could range from none at all, to a full ISO 9000 implementation.

Before the exercise began, the quality/business model was explained. This took a little under one hour, including answering questions raised. The teams were left on their own, except for explanations in response to operational questions. After a little over one hour of play, all teams successfully operated the virtual factory. One team needed rather specific help; all the others got by on their own or with minimal clues. A one hour discussion of experiences followed.

Results
On average, the teams spent 60 virtual months and four tries to "get it right". Failures included bankruptcy and/or substantially reduced market share before the team decided to abort the try. Translating these results into the more complex real world, should we be surprised if many firms don't get ISO 9000 implementations right the first time, or the second...?

When asked if they got 5 years of experience, everyone raised a hand. Obviously these mature executives didn't believe an hour of simulation was equivalent to five years of running a real factory, but all did think the exercise was profitable: "time well spent". There was no question that this "practice time" would save time and money in real life implementations and tuning of existing quality systems.

Some of the participants already had experience implementing and maintaining ISO 9000 quality systems. Even these experienced hands needed some time to get up to speed in a new situation, obtaining insights in the process. When possible, employing experienced people makes sense but does not, by itself, guarantee continued success. The externalities and parameters [labor rates, market share, quality levels, et.al.] of your own situation may change dramatically over time.

Initially, participants with bottom line responsibility were typically skeptical about the reputed benefits of ISO 9000, looking on it as a "necessary evil". When it was realized that to "win" one must act on the information from the quality system and invest in continuous improvement by funding recommended corrective actions, attitudes towards ISO 9000 shifted favorably. ISO 9000 became a beneficial tool to help steer, and not a paperwork nightmare to endure.

Conclusions
Over the next several years, people with ISO 9000 experience will shift from a small minority to a large majority. ISO 9000 implementations and operations will be smoother, with fewer missteps. The benefits of using ISO 9000 will be borne out by countless examples. In the meantime we can, as has been done in areas ranging from astrophysics [15 billion years in 15 hours] to garden planning [10 years in 10 minutes], compress this time using simulation.

• We found a mini workshop is certainly feasible:
• A meaningful exercise is manageable in a half day;
• Hands-on action holds participants' interest;
• The challenge appeals to competitive instincts;
• Hardware rental costs are nominal [Our's were indeed. Notebook computers were furnished by participants.];
• Software is reusable, leaving the major outlay for the facilitator.

Getting executives together can be a major obstacle. [We scheduled the simulation exercise as part of another program which already had their interest and commitment.]

Implications
We’ve been able to demonstrate that meaningful business/quality simulations are economically feasible. They can be effectively used for providing hands-on experience with ISO 9000 in a virtual environment that is considered, by experienced participants, to be a useful representation of reality.

Executives need an understanding of business/quality interactions to make informed decisions regarding ISO 9000, but have little time and a healthly skeptism about received wisdom. Many of these executives have had positive B-School experience with business models, creating a receptive audience for business/quality simulations which offer direct experience in a compressed time frame.

Broad application of business/quality simulation (e.g. in schools and training workshops) will substantially accelerate both the rate of growth and the rate of success of the ISO 9000 movement. Recent tests in business schools provide support for this optimism.

It is in the best interests of all parties; registrars, training organizations, consultants and the companies themselves to shorten the ISO 9000 learning curve. The faster companies reach the point where they're getting positive returns on their ISO investment, the wider the acceptance of this "new" and useful standard will be. Hands-on simulation is a proven technique to compress the learning curve.

JKA,Inc
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