Daily Archives: September 12, 2010

Quality DOES NOT Equal Risk Management

Every now and again I see a headline that causes me to foam at the mouth. One of the most recent examples is a recent article in Industry Week titled Quality Equals Risk Management. While I’m generally a fan of this publication, I can’t stand it when a headline makes such an erroneous claim.

Quality is a by-product of proper Risk Management. Quality Control is an aspect of proper Risk Management. But even Quality Control does not equal Risk Management! Risk Management is a broad initiative that looks at, and attempts to mitigate, all of the risks in your physical, financial, and information supply chains. This includes managing financial risks around currency exchange, commodity prices, and economic instability. Environmental risks around natural disasters, climate change, and accidents involving hazardous materials. Political risks involving terrorism, the proliferation of Weapons of Mass Destruction (WMDs), failing states, and crime. Compliance and Regulatory risks stemming from globalization, expansion and restriction of trade, and regional instability. Workforce risks from infectious and chronic diseases, pandemics, and liability regimes. And other product risks from lack of raw materials, transportation breakdowns, and theft. Quality is just one aspect of risk — and quality control is just one aspect of risk management!

All quality suggests is that you have good quality control programs in place — but it doesn’t even guarantee that! It might mean you have a high quality supplier who takes pride in their work and goes the extra mile to insure quality despite your shoddy practices. And while the article is right in that quality is the most powerful when it is engaged to prevent defects instead of detecting them after the fact, it is still only one aspect of a well rounded risk management program.

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The Triple-A Approach to Growing Green

A recent article in the Harvard Business Review on growing green: three smart paths to developing sustainable products presented three broad strategies that those companies looking to obtain green growth can consider. While each strategy, as the article suggests, can be used independently, the best results will be obtained if all three can be used in unison. But first, the strategies:

1. Accenturate

Accentuation is the process of identifying and playing up existing, or latent, green attributes in the current portfolio. For example, if your company has been developing products with environmentally friendly raw materials or using recyclable packing for decades since before it came into fashion, you can already claim some level of environmental sensitivity. (And even a small claim can lead to substantial savings if the sustainability claims are not exaggerated — the media is quick to pick up on, and shame, greenwashers. For example, Brita increased its sales 23% compared with the category market average of 2% with such a strategy.)

2. Acquire

If there are no green products in your portfolio, buy someone else’s. If you can find one that has a good reputation, but lots of room for growth, you can hit the leprechaun’s jackpot. Just don’t try to integrate their operations into yours too rapidly if there is a cultural divide. The acquired company might have to operate as a separate division for a while. During this time, you’ll need to observe them and slowly replicate the most productive practices and ideals throughout your operations. After all, they’ve already mastered eco-friendly manufacturing, sustainable supply chain management, and green market development, so you need to learn from them.

3. Architect

If your company has a history of innovation and considerable new product development capability, building green products from scratch is an option. Even though this approach is the slowest of the three, it’s actually the most valuable as it forces the company to acquire valuable sustainable competency.

But the best approach for most companies will be a combination of all three strategies. The company should start by identifying and capitalizing on any sustainable products or processes it already has in place. As long as it doesn’t over-reach in its claims, this will help it to establish some street cred. Then it should look for an appropriate acquisition target. Not only will this add credibility by adding more green products to the product line, but it will give the company the expertise it needs to design, manufacture, and market new green products. Then, it should take what it has learned and start architecting it’s own green products, replacing those products in its catalog that aren’t green one by one. Eventually, everything will be green and it will clearly stand out from the crowd when compared with its competition.

For more information on how to accentuate, acquire, and architect, check out the article. It also has some great questions to ask when deciding if a particular strategy is right for you.

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