Professional Documents
Culture Documents
www.elsevier.com/locate/technovation
Department of Management, Monash University, PO Box 197, Caulfield East, VIC 3145, Australia
Received 3 July 2000; accepted 6 October 2000
Abstract
This paper discusses the relationship between the implementation of Total Quality Management (TQM) and innovation performance. The discussion arises primarily based on the considerable controversy concerning this relationship that appears in the literature.
As of interest to resolve this controversy, a research framework is developed preceded by a theoretical discussion of the multidimensionality of TQM when applied in different organizational contexts. The primary proposition of this framework is that the implementation of TQM practices will be influenced by the external and internal environment as well as the strategy adopted by the firm.
The model of TQM implemented is then reflected in terms of different outcomes relating to quality performance and innovation
performance. 2001 Elsevier Science Ltd. All rights reserved.
Keywords: TQM; Innovation; Relationships; Literature review
1. Introduction
The emergence of Total Quality Management
(TQM) has been one of the major developments in
management practice. TQM began to be introduced in
the US around 1980, primarily in response to severe
competitive challenges from Japanese companies. The
recognition of TQM as a competitive advantage is
widespread around the world, especially in Western
countries, and today very few (especially
manufacturing) companies can afford to ignore the
term TQM (Dean and Bowen, 1994). On the other
hand, innovation has also received considerable attention as having a crucial role in securing sustainable
competitive advantage in todays competition. As
Tushman and Nadler (1986, p. 74) assert:
In todays business environment, there is no executive
task more vital and demanding than the sustained
management of innovation and change. . . . To compete in this ever-changing environment, companies
must create new products, services, and processes; to
1
Qualifying criteria and winning order criteria were first formulated
by Hill (1985).
0166-4972/01/$ - see front matter 2001 Elsevier Science Ltd. All rights reserved.
PII: S 0 1 6 6 - 4 9 7 2 ( 0 0 ) 0 0 0 7 0 - 5
540
concerning the relationship between TQM and innovation. As presented in the next section, one group of
arguments supports the positive relationship between
TQM and innovation, implying that organizations that
implement TQM will be successful in innovation. The
opposite group of arguments claims that TQM will hinder organizations from being innovative due to several
inherent elements that are not congruent with the spirit
of innovation. These two arguments are each considered in turn.
2.1. Arguments in support of the positive relationship
between TQM and innovation
Arguments that support a positive relationship
between TQM and innovation suggest that companies
embracing TQM in their system and culture will provide
a fertile environment for innovation (growth) because
TQM embodies principles that are congruent with innovation (Mahesh, 1993; Dean and Evans, 1994; Kanji,
1996; Tang, 1998; Roffe, 1999). In this regard, the principle of customer focus encourages organizations to
search consistently for new customer needs and expectations and therefore leads organizations to be innovative
in terms of developing and introducing new products as
a continual adaptation to the markets changing needs
(Juran, 1988). Customer focus also suggests the importance of delighting customers. This means that suppliers
not only need to meet customers basic and stated
requirements but to do so creatively to exceed those
needs and expectations (i.e. going beyond conformance).
This is a strategy very much associated with innovation.
Likewise, continuous improvement encourages change
and creative thinking in how work is organized and conducted. Finally, the principles of empowerment, involvement, and teamwork are also substantial in determining
the success of organizational innovation.
A study on best practice of innovation management
(Zairi, 1999) among several world-class organizations,
including D2D, Rover Group, IBM (UK) Ltd, 3M,
Ford, AT&T, Cadillac, Hewlett Packard, Rank Xerox,
Exxon Chemical, and Kodak Ltd, reveals that some of
the practices are well recognized as TQM elements.
These practices include an implementation of such
principles as quality culture, learning organization,
customer-driven organization, and continuous
improvement. More specifically, a wide variety of the
so-called quality tools, including quality function
deployment (QFD), Taguchi methods, design of experiments, statistical process control (SPC), failure mode
and effect analysis (FMEA), Poka Yoke, benchmarking, six-sigma design, seven problem-solving
tools, seven planning tools, ISO 9001 quality system
standards, employee empowerment and involvement,
multifunctional teamwork, and supplier partnership, are
also included in these practices.
541
542
Fig. 1. The company and market perceptions of product innovation (Davis and Moe, 1997, p. 340).
people to work on unambitious goals and derive solutions that are not novel. Harari (1993b; p. 37) furthermore suggests that
obsessing internally until one achieves a zero-defects
do-it-right-first-time routine is a dangerous luxury
that often slows down new breakthrough development
in products and services.
From a strategic perspective, incremental improvement
may allow business to catch up to its competitors, but
it cannot achieve breakthrough performance that will
permit it to leapfrog past them. Therefore, it is suggested
that any business culture that emphasizes catch-up strategies, without consideration of the need for breakthrough change, will soon be outdated (Fuchs, 1993; Jha
et al., 1996).
2.2.2. TQM could lead organizations to be narrowminded
Customer focus could lead organizations to be
reactive and short term in focus in terms of serving the
current and stated needs of customers. As Reed et al.
(1996, p. 178) suggest:
Because quality means both producing products to
specifications and meeting customers expectations,
the needs of customers becomes a key input to TQM.
In this way, such firms would fail to search customers
latent needs. As a result, they fail to drive a generative
learning by searching for the unserved, untapped potential in markets. Customer focus, therefore, could build a
tyranny of the served market in which managers see
the world only through their current customers eyes
(Slater and Narver, 1998). As such, those companies
may not be aware of the uncertainties of the future in a
dynamic and turbulent market and, thus, not be prepared
to deal with market discontinuity (Kim and Marbougne,
1999). Finally, customer focus also strongly enforces the
543
Table 1
Features of kaizen and innovation (Imai, 1986, p. 24)
Kaizen
Innovation
Short-term, but dramatic
Big steps
Intermittent and non-incremental
Abrupt and volatile
Select few champions
Rugged individualism, individual ideas and efforts
Scrap and rebuild
Technological breakthroughs, new inventions, new
theories
Requires large investment, but little effort to
maintain it
Technology
Results for profits
Better suited to fast-growth economy
1
2
3
4
5
6
7
8
Effect
Pace
Time frame
Change
Involvement
Approach
Mode
Spark
Practical requirements
10
11
12
Effort orientation
Evaluation criteria
Advantage
maintenance of long-term relationship with existing customers. Whilst this sounds quite logical, existing customers, however, can substantially constrain a firms
ability to innovate because a company will fear that producing innovations may disturb the way of doing business with the current customer (Wind and Mahajan,
1997). Focusing on the majority of customers could
result in perceiving risk of losing existing customers and
will, therefore, prevent companies from being innovative
by pursuing conformance at the cost of innovativeness.
As a matter of interest, Christensen and Bower (1996)
report findings that strongly challenge the prevailing
concept of customer focus by having revealed that firms
lost their position as industry leaders because they listened too carefully to their customers.
2.2.3. Based on the issue of risk avoidance and
adaptive approach, TQM could strategically lead
organizations to be imitators or followers rather than
innovators or leaders
The pursuit of customer satisfaction can overwhelm
other strategic performance indicators such as those concerned with new product success, for example Miles and
Snows (1978) prospector strategy. This particular strategy is closely associated with producing radical innovation for new markets that clearly involves a high
degree of risk. By suggesting that customer focus does
not encourage organizations to consider radical product
innovation, it also implies that customer focus does not
support the concept of prospector strategy. In addition,
as discussed before, customer focus drives organizations
to serve the existing market. Whilst pursuing a customer
satisfaction strategy is undeniably important, the point
to note here is that in satisfying its customers, an organization can also offer them something that they have
never experienced or expected before which is clearly
valuable to them (Kim and Marbougne, 1999). Innovative companies, therefore, will emphasize more on
informing and educating customers rather than listening
to them with regard to the introduction of new products
into the market (Wind and Mahajan, 1997). Likewise,
adoption of new technology to improve the process that
leads to radical change is unlikely to obtain support due
to perceived risk, which is not solely concerned with
cost but also with wider issues in relation to the impact
of the change.
2.2.4. TQM could hinder creativity due to the
enforcement of standards, or formalization
Imai (1986) strongly suggests that continuous
improvement requires standardization. He proposes a
combined approach between the improvement (PDCA)
cycle and the standardization (SDCA) cycle.2 As such,
continuous improvement requires a regulatory standard
and activities that are sufficiently routine to be well
understood. Therefore, control and stability is the core
of the continuous improvement process (Jha et al.,
1996). Whilst standardization is necessitated for conformance and error reduction, from an innovation point
of view it could trap people into staying with what is
workable and believe this to be the best solution, as
asserted by Kanter (1983, p. 70):
Organizations with a formula that works well are
doomed to replicate it, handing over their operations
to people who control things so that there are no deviations from the formula.
PDCA stands for Plan-Do-Check-Act, and SDCA stands for Standardize-Do-Check-Act. Further details can be found in Imai (1986, pp.
6065).
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545
ence in defining what innovation is, particularly in differentiating the incremental and radical types of innovation. It must be noted, however, that while the
distinction between these two types of innovation has
been acknowledged in innovation studies, to differentiate
them is, in itself, quite problematic (Dewar and Dutton,
1986). Even so, TQM scholars commonly refer to any
type of change as the result of innovation, therefore
arguing that continuous improvement is one type of
innovation (Dean and Evans, 1994). On the other hand,
innovation scholars prefer to confine innovation in terms
of radical change and to distinguish it from incremental
change which they prefer to label as improvement
(Abernathy and Utterback, 1988). They commonly argue
that improvement is simply doing something in a better
way, but innovation is about doing something differently (Kirton, 1976). As an example, the distinction
between continuous improvement and re-engineering is
based on the principle that the first focuses on the existing system and continually seeks ways to enhance its
performance, whilst the latter re-starts everything from
the beginning and thus establishes discontinuity with
the past.
The essence of the negative arguments raised against
TQM above, however, is more profound than solely distinguishing the radicalness of change. What have been
highlighted above are the different behavioral traits,
ways of thinking, approaches, and principles embodied
in TQM in contrast to innovation. For example, the difference is clearly seen in the issue of product innovation.
Whilst TQM does support the importance of product
innovation, the approach is more reactive than proactive,
meaning that TQM tends to encourage new product
development only when there is such an explicit demand
from customers. This is quite in contrast to the philosophy of innovative companies which creates demand
through innovation. In essence, TQM is more marketpull (or customer-driven) whilst innovation is more product-push.
By and large, the debate on the relationship between
TQM and innovation warrants a rigorous study if there
is to be obtained a definite yes/no answer regarding that
relationship. While this could result in a clear conclusion
from a practical perspective to accept or reject the applicability of TQM for innovative organizations, this is
hardly possible to achieve in view of the unclear definition and boundaries of TQM itself. Moreover, a number of scholars (for example, Sitkin et al., 1994; Spencer,
1994; Moreno-Luzon and Peris, 1998) have argued that
this conflict can be resolved if we can accept the idea
of perceiving TQM as a multidimensional model instead
of a single exclusive one. They suggest that TQM has
different facets, and this can be seen from various terminologies that have been introduced in the area of quality management, such as quality control, quality assurance, total quality control, company-wide quality
Customer focus
Continuous
improvement
Teamwork,
Empowerment should make people feel they have a certain degree of
empowerment and autonomy, are less constrained by technical or rule-bound aspects, and selfinvolvement
efficacious in doing their work, which will make them innovative
Cross-functional teamwork is one of the most effective channels of
communication, and communication is recognized as the primary determinant
in organizational innovation
Positive arguments
TQM elements
Table 2
Summary of conflicting arguments on the relationship between TQM and innovation
Negative arguments
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547
that, based on the existing literature, ideal quality management should not be affected by the organizational
context, meaning that good quality management applies
to all types of companies and situations regardless of
industry sector, competition, or types of products. On
the other hand, the organizational context may affect the
practice of quality management. Their findings supported their hypotheses well and, in particular, the result
suggested that the actual quality management practices
of manufacturing organizations are affected by both
internal contextual factors, such as corporate support for
quality, past quality performance, and management
knowledge, as well as external contextual factors, such
as extent of entry barriers and degree of external quality demands.
In the context of its relationship with innovation, the
multidimensionality and contingency of TQM is discussed by several scholars, prominently by Sitkin et al.
(1994) and Spencer (1994). Sitkin et al. (1994) argue
that TQM, as a philosophy which consists of three basic
preceptscustomer focus, continuous improvement, and
total systemembodies two distinctive and antagonistic
orientations, namely control and learning. They propose
that although guided under similar (three) underlying
TQM precepts, organizations can apply two significantly
different goals and practices based on two different
orientations, labeled as TQC (Total Quality Control) and
TQL (Total Quality Learning). TQC is associated more
with quality in terms of conformance, and TQL is connected more with innovation. Sitkin et al. (1994)
strongly argue, however, that the singular emphasis on
control has characterized traditional approaches to TQM
implementation and this is something that has resulted
in the rise of the negative arguments concerning the
relationship between TQM and innovation presented
above.
In the same respect, Spencer (1994) discusses TQM
practices in relation to three organization models,
namely mechanistic, organismic, and cultural. She
believes that an organization that adopts TQM can be
characterized by any of these models because there is
a linkage between TQM practices, as advocated by its
proponents, with each of the three models. She argues,
however, that this does not mean that organizations that
practice TQM may hold strictly any one of these models;
rather, they may oscillate among them or have an
orientation toward one of them. For example, the stated
goal of TQM to improve quality is associated with the
mechanistic model, because in practice the real objective
of pursuing quality could well shift into productivity and
efficiency, something on which mechanistic organizations focus. On the other hand, the ideas of employees
empowerment and cross-functional teamwork are linked
closely to the organismic model.
A link between what is posited by Sitkin et al. (1994)
and Spencer (1994) can then be built. It appears that
548
3
From this sentence onward, the term organismic and organic
will be used interchangeably.
549
The relationship between an organizations environment and its strategy has been formulated and examined
in the strategic management field. Most findings suggest
that organizations will implement different strategies
contingent with the condition of the environment wherein they operate (see, for example, Swamidass and Newell, 1987; Miller, 1988; Ward et al., 1995). In the context
of an organizations strategy, some scholars have given
strong support to the view that TQM must be adopted
as a strategic model in an organization (Garvin, 1988;
Schonberger, 1992). TQM, therefore, has successfully
elevated the implementation of quality management
from an operational level to a strategic level. Dean and
Bowen (1994), however, argue that from a strategic
management perspective, TQM emphasizes strategy
implementation, or deployment, rather than strategic
choice, or content. This view arises because TQM proponents have so elevated the role of quality that TQM
appears to transcend strategy. The implication is that by
putting quality forward as an ultimate strategy, it will
eventually drive improvements on other sources of competitive advantage, such as cost. Belohlav (1993) and
Reed et al. (1996) even argue that TQM simultaneously
encompasses more than one of the generic strategies in
Porters (1980) model, particularly cost leadership and
differentiation. When quality is concerned with providing better products that satisfy customers needs, the
orientation of the strategy is differentiation. TQM, at the
same time, also leads organizations to reduce cost as a
result of the elimination of defects and wastes and, therefore, also leads them to the adoption of a cost leadership strategy.
By contrast, however, reviewing the literature by
TQM proponents (Crosby, 1979; Deming, 1982, 1986;
Juran and Gyrna, 1993; Feigenbaum, 1983) suggests
that even though TQM may encompass both a cost
leadership and differentiation strategy, the emphasis is
primarily directed towards cost leadership. As Deming
(1982) suggests in his quality improvement chain
concept, organizations can enhance their competitiveness by improving quality resulting in cost
reduction through the elimination of scrap and rework.
Their competitive advantage over predecessor products is based on superior functional performance
rather than lower initial cost, and so these radical
innovations tend to offer higher unit profit margins.
With respect to the differentiation strategy, innovative
companies also tend to emphasize new product development (Miller, 1988; Gobeli and Brown, 1994). For
example, Sony introduces 200 new products and major
enhancements to 800 existing products each year, whilst
3M has determined its corporate goal to derive 30% of
its revenue from products introduced within the past four
years (Higgins, 1995).
Apparently, arguments suggesting that TQM puts
more emphasis on a cost leadership strategy rather than
differentiation or that it pays more attention to process
improvement than product development have a strong
basis. However, considering the multifacetedness of
TQM, it is hardly possible to ascribe to TQM in such
an exclusive position. The problem with TQM is not
rooted solely in the difficulty of defining what TQM is
but, more fundamentally, the confusion in defining
quality (Watson and Korukonda, 1995). Reeves and
Bednar (1994) affirm that a search for the definition of
550
quality has yielded inconsistent results, and they suggest that there are, at least, four definitions of quality,
each leading to different implications in terms of a
firms strategy and practice. The four different definitions are: quality as excellence, quality as value, quality as conformance to specifications, and quality as
meeting or exceeding a customers expectations. Dean
and Bowen (1994) suggest that when quality is defined
as meeting or exceeding customer expectations, it can
be seen as encapsulating any source of competitiveness,
including innovation. However, when quality is defined
narrowly as, for example, conformance to specificationas asserted by Crosby (1979)it is clear that
it will lead to a different strategy from that pursued by
innovation. Reeves and Bednar (1994), however,
strongly believe that the definition of quality as meeting
or exceeding customers expectations is the most complex definition of quality and, thus, is the most difficult
to measure. The primary reason for this view is that
determining and measuring customer expectations is a
complex task. It is complex not only when dealing with
the multiple attributes and preferences of different individuals but also because customers themselves often do
not know what their real expectations are. Moreover,
by contrast, measuring quality as conformance to specifications is relatively straightforward for monitoring
performance within an organization but is also useful
in benchmarking exercises, particularly in the manufacturing sector.
Nevertheless, what is argued here is that the discussion of an organizations strategy with respect to
TQM and innovation does not seek a conclusion as to
whether TQM supports or hinders innovation. Instead, it
has been posited that TQM can be used in a different
strategic context, such as service, speed, and cost, as well
as quality and innovation. Porter (1980) argues that an
organizations strategy will have a significant influence
on organizational structure and, thus, each particular
strategy has different implications for organizational
structure and practice. In this context, then it can be
argued that organizations that adopt different strategies
will implement TQM with different emphasis on certain
practices or elements.
3.3. The role of organizational culture
The role of organizational culture in understanding
how firms work has received considerable attention in
the TQM and innovation literature. From the innovation
point of view, Hauser (1998) asserts that in managing
innovation, management is restricted mainly to creating
innovative contexts. The associated implication is that
the propensity for innovation is something inherent in
the members of the organization, such as in their personality or psychological substance. Innovative culture has
been variously defined in the literature. For example,
Claver et al. (1998, p. 61) give the definition of innovative culture as:
a way of thinking and behaving that creates, develops
and establishes values and attitudes within a firm,
which may in turn raise, accept and support ideas and
changes involving an improvement in the functioning
and efficiency of the firm, even though such changes
may mean a conflict with conventional and traditional behaviour.
Herbig and Dunphy (1998) summarize the works of
several innovation scholars who specify typical cultural
traits in the organization that are associated with innovation, such as individualism and competition, willingness to take risks, readiness to accept change, long-term
orientation, weak uncertainty avoidance, openness to
new information, and the value of education.
Literature on organizational innovation, both anecdotal and empirical, emphasizes the importance of culture as a major determinant in innovation performance
(for example, Robertson and Wind, 1980; Kanter, 1983;
Branen, 1991; Feldman, 1988). Miller and Friesen
(1982) even postulated that innovations in firms with
entrepreneurial culture are more internally, rather than
externally, driven. Their findings support the notion that,
while environmental hostility and dynamism significantly impact on the promotion of innovation, it is the
strategic choice involved more so than the environmental
pressures that plays a greater role in promoting innovation in entrepreneurial firms.
Similarly, organizational culture is also an important
part of TQM. Much of the earlier focus of its studies
was on the hard aspects, such as the tools, techniques,
and systems. More recently, the emphasis has shifted to
consider its soft, behavioral and cultural aspects (see,
for example, van Donk and Sanders, 1993; Westbrook
and Utley, 1995; McNabb and Sepic, 1995). This shift of
emphasis has resulted because implementations of TQM
have failed, thus preventing companies from realizing
the potential benefits of TQM (Tata and Prasad, 1998).
Kekale and Kekale (1995) argue that perceiving TQM
narrowly as a set of tools and techniques (i.e. hard
aspects) has proven to be one of the primary failures of
TQM implementation.
Despite the recognition of the importance of culture
in TQM discussions, there is still no clear definition
of a TQM-type culture. Except for a few recent works
(Chang and Wiebe, 1996; Zeits et al., 1997), most
TQM writerswhilst emphasizing the importance of
cultural change in TQM implementationfailed to
delineate the characteristics of the TQM culture
(Waldman, 1993). Empirical studies tend to focus on
the articulation of TQM practices and not TQM culture. While this does not indicate the ignorance or
abandonment of the importance of defining TQM-type
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Fig. 2.
Research framework.
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ations management. He has authored or co-authored over 90 papers published in refereed journals, as well as three books and a number of chapters
contributed to books. His current research interests are in
manufacturing/operations strategy, technology/information management,
quality management, supply chain management and lean/agile production
systems. He has received research grants from the State and Federal
Governments, the Australian Research Council and Monash University.