Beware Product Death Cycles -- - -- by Art Kleiner

Beware Product Death Cycles -- - -- by Art Kleiner
----------------------------
04/28/05
----------------------------

The quality wars were allegedly won in the 1980s. Why, then, are we
again overwhelmed by junk?
How's your "idiot light"?
That's the light on your car dashboard that indicates a malfunction
with the vehicle's electronic sensors. It may also be a signal of the
decline of product quality — not just in any particular car, but in
manufacturing in general.
The light on my family car, a five-year-old European-made station
wagon, flickered on for no apparent reason about a year ago — and
stayed on. We kept bringing it to our dealer for repair. Each time,
the car's computer was checked, its switch was reset, and the light
went off…before going back on again.
Finally I exploded in frustration: "I've brought this car back four
times!"
"Four times?" said the dealer's repair shop manager. "We've had
customers bring theirs in ten times."
Clearly, it takes a lot of fortitude to be a consumer these days. No
doubt many consumers gained an expectation that product quality would
naturally improve, year after year, during the late 1980s and early
1990s. This was the heyday of quality management, when Japanese-
inspired continuous quality improvement was seen as essential to a
manufactured product's identity. But for the past decade or so, many
corporations seem to have reverted to a more purely cost-based
strategy, emphasizing short-term gains from the production of cheaply
made, junky products. Kitchen appliances, power tools, cell phones,
computer printers, DVD players, toys, and many other consumer goods
are increasingly conceived and sold as disposable commodities.
Although these products are constantly sugar-coated with more features
and capabilities, their durability and longevity are rapidly
dwindling.
As in the 1970s, this strategy poses serious dangers — from the
erosion of well-established brands to the ultimate financial failure
of companies. But it may be harder now to reverse the tide, because
several trends in manufacturing and marketing subtly reinforce one
another. Instead of facing competition from high-quality Japanese
manufacturers, companies in industrialized countries face tough
competition from low-wage countries and high price-cutting pressure
from global retailers. Even when producers do promote quality, far
fewer consumers seem to care. In this environment, many firms now seem
to perceive the production of inferior products as an effective
bottom-line strategy. But giving in to this increasingly irresistible
temptation can put a company's future market share and profits at
risk.
Is product quality getting worse? It's better than it was 30 years
ago, by far — but it has been slipping backward ever since, say, 1993
(which happened to be the year that the preeminent quality advocate of
American and Japanese business circles, W. Edwards Deming, passed
away). The best empirical evidence of decline comes from the annual
American Customer Satisfaction Index (ACSI), which is based on
customer surveys and cosponsored by American Society for Quality and
the University of Michigan. ACSI ratings of manufactured goods have
basically held steady over time, but exceptional companies (notably
Dell and Apple, with satisfaction increases of 9.7 percent since 1997
and 5.2 percent since 1994, respectively) skew the results. Other big-
name companies show deterioration, including those that have invested
millions of dollars in associating their brands with reliability and
quality: Hewlett-Packard has dropped 9 percent in customer
satisfaction since 1994, and several appliance manufacturers are down
more than 4.5 percent. Even Six Sigma mainstay GE has slipped 2.5
percent. (A full table of this company data can be found at www.
theacsi.org.)
Part of the reason for this serious dip in quality among American
manufacturers lies in where they offshore factory operations and
purchase components and parts. Chinese and other low-cost
manufacturers have shown that you don't have to offer quality to
compete if you can slash prices enough. "I see no evidence of the
managers and workers at these facilities having the slightest concept
of quality," says John Dowd, an American quality expert who has
visited dozens of Chinese factories. "They will comply with customer
requirements when they are monitored closely, but left alone, it's
strictly `Get it out the door.'"
At the same time, consumers' tolerance for poor product quality and
short-lived products is higher because it costs less today to replace
a broken toy, cordless drill, or VCR. In the early 1990s, people
wouldn't bother to fix defective products costing $30 or less,
according to Consumer Reports, but that price point has steadily
risen, to about $100 now. These trends combine with the advancing
microchip and with insistent price pressure from retailers, in a way
that may have permanently changed attitudes about product quality and
the competitive environment in many industries. Rather than retooling
for continual upgradeability, manufacturers may simply assume unending
consumer tolerance, and slide down the slope of cost reductions and
quality erosion. If this attitude continues to take hold, then former
major brand producers will move to a new strategy of survival as
commodity makers of retail house brands, with devices engineered for
replacement every year or so.
That may be an effective strategy in the short run — maybe even for
years. But companies that test the patience of consumers could pay a
high price for thinking that quality is low on people's list of
priorities when they make a purchase. Greg Brue, president of
Albuquerque-based Six Sigma Consultants and author of Design for Six
Sigma (McGraw-Hill, 2003), has extensively studied warranty data, such
as the number of units returned each year to retailers (and hence to
manufacturers) for repair or replacement, and is convinced that the
decline of product quality is a cultural Rubicon for companies — a
potential point of no return on the road to eroded market share. He
claims he can predict whether marketers will lose customer loyalty
five years from now on the basis of their profile of warranty costs
today.
To Mr. Brue, there are two categories of products that retailers sell,
each with its own pattern of deterioration — its own "product death
cycle." According to his research, companies that produce products
with lower warranty return rates have far stronger bottom lines five
years later than those whose product quality erodes more rapidly. In
other words, consumers stop buying products and brands they think are
likely to break down. Although many top executives may decide that
product failures and loyalty erosion aren't that important in the
larger scheme of business, Mr. Brue says "that's not a responsible
fiduciary attitude."
"A product failure leaves a scar in a company's reputation," he says.
"It makes the consumer wonder: Will the company get the next one
right?"
Several experts argue that a solution to our latest quality crisis
will emerge from competition and innovation. Jack West, past president
of the American Society for Quality, says that even some Chinese
companies are choosing to adopt Six Sigma techniques. New technologies
like radio frequency identification (RFID) chips also offer hope. If
your DVD player needs a new loading tray, the RFID chip will detect
the problem, notify the factory, and arrange delivery of the proper
replacement part, ready to snap into place.
But it's not certain that manufacturing companies will want to make
this kind of shift. Having evolved into suppliers of retail brands,
they may not be in a position to innovate or to invest in quality, as
they did in the mid-1980s. And in a world of cheap, disposable
products, who will care? Maybe only the last few managers, of the last
few quality brands, who, like monks in the Dark Ages, keep alive an
ideal that others have forgotten — and derive premium profits from a
premium audience that nobody else understands

Hey Nash ;)

Come join my network at hi5!

I now have many friends in my network! You can meet all of them, plus more than 20 million other Hi5 members! Once you join, you will immediately be connected to all the people in my circle of friends.

Hi5 is an online service that lets you meet new people, view photos, browse profiles, and chat with your friends.

I'll see you inside,

Naveen

already has more than 20 million members!

A blonde and a redhead are watching the 6 o'clock news one evening. The redhead bets the blonde $50 that the man in the lead story, who is threatening to jump from a 40 story building, will jump. "I'll take that bet," the blonde replied.
A few minutes later, the newscaster breaks in to report that the man had, indeed, jumped from the building. The redhead, feeling sudden guilt for having bet on such an incident, turns to the blonde and tells her that she does not need to pay the $50.
"No, a bet's a bet," the blonde replies, "I owe you $50 dollars."
The redhead, feeling even more guilty, replies "No, you don't understand, I saw the 3:00 edition, so I knew how it was going to turn out."
"That's okay," the blonde replies, "I saw it earlier too, but I didn't think he'd do it again."

Short road

Staying Out Late

Two married buddies are out drinking one night when one turns to the other and says, "You know, I don't know what else to do. Whenever I go home after we've been out drinking, I turn the headlights off before I get to the driveway. I shut off the engine and coast into the garage. I take my shoes off before I go into the house, I sneak up the stairs, I get undressed in the bathroom. I ease into bed and my wife STILL wakes up and yells at me for staying out so late!"
His buddy looks at him and says, "Well, you're obviously taking the wrong approach. I screech into the driveway, slam the door, storm up the steps, throw my shoes into the closet, jump into bed, slap her on the butt and say, 'You as horny as I am?' . . . and, she always acts like she's sound asleep!"

things said at court

Q: What is your date of birth?
A: July fifteenth.
Q: What year?
A: Every year.

Q: What gear were you in at the moment of the impact?
A: Gucci sweats and Reeboks.

Q: This myasthenia gravis - does it affect your memory at all?
A: Yes.
Q: And in what ways does it affect your memory?
A: I forget.
Q: You forget. Can you give us an example of something that you've forgotten?

Q: How old is your son - the one living with you?
A: Thirty-eight or thirty-five, I can't remember which.
Q: How long has he lived with you?
A: Forty-five years.

Q: What was the first thing your husband said to you when he woke that morning?
A: He said, "Where am I, Cathy?"
Q: And why did that upset you?
A: My name is Susan.

Q: And where was the location of the accident?
A: Approximately milepost 499.
Q: And where is milepost 499?
A: Probably between milepost 498 and 500.

Q: Sir, what is your IQ?
A: Well, I can see pretty well, I think.

Q: Did you blow your horn or anything?
A: After the accident?
Q: Before the accident.
A: Sure, I played for ten years. I even went to school for it.

Q: Do you know if your daughter has ever been involved in the voodoo or occult?
A: We both do.
Q: Voodoo?
A: We do.
Q: You do?
A: Yes, voodoo.

Q: Trooper, when you stopped the defendant, were your red and blue lights flashing?
A: Yes.
Q: Did the defendant say anything when she got out of her car?
A: Yes, sir. Q: What did she say? A: What disco am I at?

Q: So the date of conception (of the baby) was August 8th?
A: Yes.
Q: And what were you doing at that time?

Q: You say the stairs went down to the basement?
A: Yes.
Q: And these stairs, did they go up also?

Q: Mr. Slatery, you went on a rather elaborate honeymoon, didn't you?
A: I went to Europe, Sir.
Q: And you took your new wife?

Q: How was your first marriage terminated?
A: By death.
Q: And by whose death was it terminated?

Q: Can you describe the individual?
A: He was about medium height and had a beard.
Q: Was this a male, or a female?

Q: Is your appearance here this morning pursuant to a deposition notice which I sent to your attorney?
A: No, this is how I dress when I go to work.

Q: Doctor, how many autopsies have you performed on dead people?
A: All my autopsies are performed on dead people.

Q: All your responses must be oral, OK? What school did you go to?
A: Oral.

Q: Do you recall the time that you examined the body?
A: The autopsy started around 8:30 p.m.
Q: And Mr. Dennington was dead at the time?
A: No, he was sitting on the table wondering why I was doing an autopsy.

Q: Are you qualified to give a urine sample?

Q: You were not shot in the fracas?
A: No, I was shot midway between the fracas and the navel.

Q: Doctor, before you performed the autopsy, did you check for a pulse?
A: No.
Q: Did you check for blood pressure?
A: No.
Q: Did you check for breathing?
A: No.
Q: So, then it is possible that the patient was alive when you began the autopsy?
A: No.
Q: How can you be so sure, Doctor?
A: Because his brain was sitting on my desk in a jar.
Q: But could the patient have still been alive nevertheless?
A: It is possible that he could have been alive and practicing law somewhere.