11.10.

2011

Assuring the Economic Future of China by Managing for Quality

Gregory H. Watson
Chairman, International Academy for Quality
Beginnings of Modern Quality in China
The beginnings of modern quality in China must be credited to IAQ Academician Emeritus LIU Yuanzhang
who brought modern concepts for applying statistical methods to production to China over sixty years
ago. My own involvement in the Chinese quality movement is much more recent. Although I had
studied Asian history and the writings of the ancient Chinese masters during my university days, I did not
become interested in deeper study of China until I was conducting research in 1995 to support the first
study of the future of quality by the American Society for Quality (ASQ). The study of the future requires
an objective understanding of the past and assessment of the current trends that will be carried forward
into the coming years. The horizon of this first ASQ study was to look to the year 2010. As part of the
study I was curious to discover what a projection of the current 1995 economic situation would bring as
there had been some work on such productivity forecasts at the American Productivity & Quality Center
(APQC) by its founder Dr. C. Jackson Grayson, a well-recognized economist and thought leader in the
field of quality and productivity in the United States. My research focused on the change in the middle
class purchasing power parity among the leading economies. I was quite shocked to discover that,
according to my analysis, the economy of China had approximately a sixty percent probability of
becoming the leading global economy by 2010 as measured by Gross Domestic Product (GDP). The
reason for this was the accelerating growth of the middle class in China and the expansion of their
consumer abilities in addition to the strong economic base of agriculture and the growing contract
manufacturing businesses. During this study, I proposed a scenario for consideration that I called China
the Wild Card1 to represent the fact that the Western world did not recognize the great growth
potential of China and the strong likelihood of its future dominance. The scenario was not used in the
study because its likelihood was considered too remote by the other team members. But, in retrospect,
2010 did indeed represent a new leadership role of China in the global economy and its transition into
the leading global economy has the potential to be assured in the coming decade.
My Past Decade of Involvement in Quality with China
Some years later, MA Lin, Executive Secretary of the China Association for Quality (CAQ), invited me to
come to the celebration of the 50th Anniversary of the revolution of the Peoples Republic of China (PRC)
which also coincided with the 20th Anniversary of the CAQ. I was invited because I was President-elect
of ASQ and CAQ was an important partner on matters related to quality. On this visit I had the privilege
to meet Vice Premier WU Li, meet with the mayors of the leading cities in China and address a meeting
of senior government leaders on subjects of importance for developing a national industrial policy that
was based on quality. Over the past ten years, I have had a number of opportunities to address Chinese
1

In the card game of poker, a wild card can become any card in any suite at the desire of its holder. Thus, the
card adds flexibility and increases the chances of winning the hand. In much the same way the future of the global
economy was seen to rest on the development of the Chinese economy more than any other single nation.

11.10.2011
government and industry leaders on topics relating to the development of a strong foundation in quality
as the basis for micro-economic growth that can fuel macro-economic development. All of the events
in Shanghai were at the invitation of IAQ Companion TANG Xiaofen, President of the Shanghai Academy
for Quality:

1999: Micro-Economic Quality and Global Competitiveness (Beijing)

2002: Quality Enabler of Economic Expansion (Beijing)
2008: Designing Elements of a Modern Quality System (Shanghai)
2008: Quality: Basis for a Transcendent Global Culture (Shanghai)
2009: Quality for the World: The Way Out of our Economic Crisis (Shanghai)
2011: Managing for Quality During Challenging Times (Shanghai)
2011: Innovation Management: Lean Six Sigma Quality Management System (Shanghai)
2011: The Future of Quality: Aiming at Inclusive Growth (Shanghai)
2011: Comprehensive Quality Makes Life Safer and Assures Economic Well-Being (Nanjing)
2011: Comprehensive Quality Makes Life Safer and Assures Economic Well-Being (Zheng Zhou)

If these presentations have helped in some way to shape the deliberations of the Chinese government
and business leaders then I am pleased to have contributed to their education and assisted in their
development of a strategy that was applied so successfully over the past decade as well as the definition
of a great vision for the future based on the nations continuing quality activities.
Current State and Future Direction of Quality in China
During the eighth Shanghai International Symposium on Quality (SISQ-8) and Forum of the International
Academy for Quality, I was most pleased to hear the remarks of TIAN Shihong, Director General of the
Department of Quality Management of the General Administration of Quality Supervision, Inspection,
and Quarantine of the PRC (AQSIQ), as he described the current status of quality in China. He quoted a
statement made on 27 September 2011 by WANG Qishan, Vice Premier of the State Council: Quality is
the foundation, and safety is the bottom line. The work of quality is our eternal theme. Director TIAN
noted the many accomplishments over the decade of the last 10-year plan for quality development [I
was most pleased that many of these actions were contained as recommendations in my 1999 address
as the critical programs available to a national government to encourage the development of private
enterprise quality by providing enabling national infrastructure]:

The AQSIQ was established on 10 April 2001 for comprehensive management of quality under
the PRC State Council for matters related to quality management, metrology, standardization,
certification and accreditation, and administrative law enforcement.
Since 1999 China has tracked its overall product quality using a Quality Competitiveness Index.
The legal infrastructure of national and local laws, rules, regulations and treaties has been
established to define expectations for quality performance and set boundary conditions for the
acceptable level of performance.
In 2002 the Chinese Certified Quality Engineer (CQE) designation was developed and more than
102,000 individuals have achieved this professional qualification.
2

11.10.2011

A national system of quality management institutions has been established for supervision of
the development of quality and the technical supervision at the national, provincial, municipal,
and county levels of government which includes over 2,800 organizations under the umbrella
supervision of the authority of AQSIQ.
AQSIQ has established recognition systems for national units and individuals to recognize quality
performance excellence and identify role model behavior.
AQSIQ has developed a document The Outlines of Quality Development (2010-2020) which
has been approved by the PRC State Council to establish the goals, methods and major actions
to be taken to drive innovative quality development and strengthen China through embedding
quality into its cultural core.
Today, China has more organizations certified to the ISO9000 standard than any country in the
world which has opened many new opportunities for seeking international trade partners.

Remarks at the same conference by IAQ Companion LANG Zhizheng, Professor at the Beijing Institute of
Technology, provided a detailed historical account of Chinese leaders emphasis on quality as a national
policy dating to the mid-1990s. He also defined the rationale for developing Big Q or macro-economic
quality as the next step forward in advancing the development of China. The goals that have been set
for strengthening China through quality include:

2015: The quality level of major fields, pillar industries and superior companies should reach or
approach that of moderately developed countries.
2020: the overall quality level should attain or approach the moderately developed countries.
2050: the overall quality level should attain the level of developed countries.

These goals to attain a leadership position in global quality reputation are aggressive and will require
increased capacity through a higher level in the technical means by which quality results are delivered.
Since such macro-economic performance is delivered through a coordinated approach at the microeconomic level there are some important implications for the future development of quality in China
over these coming decades. In the closing section of this paper, I wish to report recommendations for
continuing this persistent advance of quality development into the future and recommend some focus
areas and actions that will accelerate the developments that are contained in the AQSIQ challenge for
the coming decade.
Challenges for the Future Development of Chinese Quality
In an address to the SISQ-8 Conference, IAQ Honorary Member H. James Harrington described results of
two surveys by the American Productivity & Quality Center (APQC) on enterprise quality measurement
as a means to improve business value. In their 2004 study, APQC noted that the American consumers
perception of the value of brands from China was low. However, in the 2010 study, brand reputation
had actually decreased compared to the 2004 performance. With the emphasis that China has placed
on quality, why did this happen? I believe that there are two reasons, both of which are contained in
limitations of the strategy pursued over the past ten years and must be addressed in the near future.

11.10.2011
The first reason is straight-forward: the true consumer perception about products is masked through the
high amount of Business-to-Business (B2B) products produced by Chinese contract manufacturers
where the original equipment manufacturer (OEM) is not evident to the consumer as the well-known
international brand receives the credit for the product value (e.g., mobile phones produced by firms in
China and sold under their international brands).
The second reason is not as evident: goods as Chinese imports tend to be purchased in the low-value
consumer market rather than as high value luxury goods, thus the original expectations are lower and
comparisons made by consumers do not always allow for equivalence in the value that is invested into
the products in terms of materials and production processes; instead consumers make their judgment of
perception based on the circumstances of use or the attributes of the actual product as they use it. This
poor performance perception is not a head-to-head comparison between products but a subjective
judgment that has an inherent bias toward the utility in application. This circumstance describes the

physics of quality in which business leaders are faced by two simultaneous trends:

First Trend: Customers always want more performance and expectations tend to rise and
markets develop to maturity; therefore increased capability is required from organizations.
Second Trend: Processes degrade in performance over time due to depreciation and the
natural effect of entropy; therefore processes tend to decrease in capability to perform.

Capability to produce an outcome is based upon a judgment by recipients of that outcome

(customers) as a comparison in effectiveness of an organization as a ration of their expectation
for results to be produced compared to the performance of the organizations process of
managing to produce those results. The gap between these initial expectations and achieved
performance gives rise to a continuous need for improving the processes of management. It is
the confluence of these two trends that is driving the decrease perception in the value of goods
produced in China.
Perhaps the most important implication from these study results is the conclusion that must be drawn
about a need for continual improvement in quality programs that were deployed over the past decade.
Note that my emphasis is on the world continual rather than continuous improvement. The reason
behind this distinction is important as it signifies the importance of a strong central organization of the
quality policy and practices of a nation and its industry. This distinction follows the original meaning as
drawn from the first modern statement of the need for continuously improving performance as

set forth as a fundamental management principle by the French mining executive Henri Fayol in
1916. Fayol emphasized the imperative for "a constant search for improvements" and he set
managements need to have an unrelenting intention to effect improvement" as a cornerstone
of business leadership (in his book General and Industrial Management). Fayol presented this
imperative in a way that defines the driving of constant improvement as a core obligation in
the practice of management.

11.10.2011

W. Edwards Deming stressed that quality must be built in at the design stage downstream
there will be continual reduction of waste and continual improvement of quality in every
activity (in his 1986 book Out of the Crisis). In this statement, Deming linked continual
improvement of quality to the innovation process as well as the need for continual
improvement in the daily management systems of organizations. This is the current emphasis
in an ISO9000 quality management system where continual improvement is defined as
recurring activity to increase the ability to fulfill requirements. In ISO9000 this activity is
addressed by discovering improvement opportunities through a constant search using audit
findings, data analysis, management reviews and other means as a way to focus on
opportunities for corrective of preventive action. So while both Deming and ISO9000 use the
term continual improvement to describe the constant effort to increase performance, we
also observe the term continuous improvement commonly used.
This is typically a
translation for the Japanese term kaizen. What is the distinction between the concepts of
continual improvement as compared to continuous improvement?
Continual is an older word than continuous and it comes from Latin origins (continuous)
with its first usage in English cited in the 14th century. The world continuous comes through a
French usage of the same Latin word and first appeared in 1673. What is the difference in their
usage? Does it imply something more profound than two linguistic interpretations of the same
source word? In observing the subtleties of usage in these words it is possible to resolve this
distinction. Continual implies a constant state of alertness always vigilant to determine if a
possible change makes sense. Thus continual improvement incorporates a requirement for the
rational review of opportunities in order to make strategic choices that will guide improvement.
This review process is implied to be systematic and continuing indefinitely in time without any
interruption it recurs regularly in a steady rapid succession it is ceaseless and thus this word
is aligned with Fayols concepts (as well as the review process that drives the front-end analysis
processes supporting Japanese Hoshin Kanri). In opposition the world continuous implies an
uninterrupted sequence in time, space, or succession changes that keep occurring without
the benefit of managerial review. This implies to me the white water of a raging river that is
flowing continuously from its headwaters down a vertical pathway and cascading through its
channel to its ultimate destination. The first picture evokes the idea of management the plan
to review and decide what to do about change managements attempt to place a system into
a state of control. However, the second picture is one of reaction to a chaotic stream flooding a
management system with a reactionary approach to steer clear of the boulders hidden within
the white water. Based on this analogy, my preference is also to use the term continual as it is
a more faithful representation of Fayols original intention for this concept.
What should be implied by continual improvement? Continual improvement certainly is not a
constant state of change merely for the sake of change. Robust continual improvement must
5

11.10.2011

be embedded into a business strategy or plan that includes incremental or evolutionary change
as well as discontinuous, breakthrough, or revolutionary change. The stimulus for choosing the
change initiative comes from learning and the choice of the most appropriate change to be
initiated should be part of a structured decision-making process. Successful change will
therefore involve managements process to constantly seeking the means to achieve growth in
its organizations performance.
Such improvement requires a never-ending stream of innovation which must be achieved by a
systematic generation of creative ideas that engages all diverse aspects of an organization as a
means to expand perspective and increase decision making quality: the diversity of ideas comes
from inclusive engagement of everyone! Thus, continual improvement requires the perspective
of a strategic organization process but it begins with a democratic process soliciting ideas and
opportunities for improvement and ends with an autocratic decision that makes a final choice
and identifies the organizational direction because the role of the leader is to interpret these
ideas and define the vision and plans to move an organization forward. Thus, following Fayol
and Deming, continual improvement must be conceived of as a function of management.

Since Fayol first established the concept of continual improvement as a fundamental concept in
management, the concept has evolved into a global quality movement that has embraced all
types of enterprises and all work disciplines. The quality movement often calls this a total
quality approach as a way to signal the need for inclusiveness by engaging all people from all
levels of an organization for achieving a common purpose or aim; defined in its most exhaustive
6

11.10.2011

sense as increasing the quality of life for all people in all areas of their lives. Therefore, we can
conclude that quality is also an aspect of management and that management should not be
positioned as a subset of quality. If this is proper then what should we consider quality?
Thus, it is planned or managed change that is important the role of quality improvement is a core
principle in the process of management. What does this mean for China? Consider the graphic above
which illustrates three layers of quality system development. In the past decade China has focused on
the foundation (regulations and standards) as well as the structure (ISO9000 System for Management of
Quality). However the next decade needs to change from one that is focused on management of quality
to one that is focused on quality of management. This is the transition to Big Q that was described by
Academician LANG as a component of the next ten year plan. While macro-quality is a combination of
micro-quality activities, the whole is greater than the sum of its parts and leadership guidance is
essential to assure that continual improvement (the rational step-by-step progress in a coherent
direction) does not become a more chaotic and wasteful approach for continuous improvement where
each organization sub-optimizes the resources of society by doing what is best in their own subjective
judgment without regard to the impact on society and humanity as a whole. Thus, the concept of social
responsibility becomes as important as management responsibility for the design and execution of the
business system and engineering responsibility for the design and execution of the production
processes. How can organizations develop the insights into developments that are necessary for
continual improvement by growing profitability in the short-term and developing strength for the longterm?
Learning for Quality Leadership

Innovation is an important aspect of continual improvement in both its incremental form (such
as evolutionary improvement) and in its breakthrough form (or revolutionary improvement). It
is through innovation that an organization assures that the quality features of its products and
services are developed into attractive quality where the customer-perceived value exceeds that
of alterative choices that are available. Thus, quality incorporates innovation as a component
of its core delivery process, just as quality includes problem-solving and management of routine
work. Organizations must consciously develop an express approach to embedding quality in all
of their activities and learn to take positive action because the development of quality is not a
natural act. The means to sustain quality originate from a quality mindset that must be learned
from conscious experience. This process is called triple loop learning and is applied at three
different levels to be effective:

Single-Loop Learning: this approach is applied at the work process level in organizations and
is focused on assuring the consistency of performance of work that is required to deliver to
consumers the level of performance that constantly meets their expectations.
Double-Loop Learning: this approach is applied at a business process level in organizations
and it focuses on how to improve the process for delivering quality at the work process level
7

11.10.2011

and this is the task of the local management.

Triple-Loop Learning: This is the higher level learning process that provides guidance to the
system about what must be learned to be competitive in the future and this learning is the
governance responsibility of the organization. This is management of the context to permit
the environment for sustained success. This learning process may be exercised by senior
leaders in a large organizations and it is part of the national system for industrial policy that
assures the global competitiveness of its firms.

This approach to learning is illustrated in the following graphic:

Triple Loop Learning focuses on learning what an organization needs to learn or learning how
to learn differently. This type of learning provides the basis for permanent change in the way
people work at the institutional or cultural level and is the realm of leadership which has the
organizational power to mandate new directions and align resources to reshape the way an
organization operates through evolution of its quality mindset or the attitude that motivates its
employees to align their personal energy with the vision and direction of the organization.
Thus, single loop learning occurs during problem-solving of work processes while double-loop
learning occurs during management review of improvement projects by integrating lessons into
the organization. Triple loop learning occurs through reflective review of change management
efforts and scanning the organizations environment and by identifying what new insights occur
that bring new knowledge for adaptation into the organizations culture. A triple loop learning
process is a significant component in a management process and it is essential for innovating
quality improvements to the process of management.
8

11.10.2011
Specific Suggestions for National Quality Development
So, what should Chinese managers in government and industry do to improve over the coming decade?
In what new directions should China work to build its national quality system? The following suggestions
are offered:

The requirement for continual improvement in the base levels of the quality pyramid means that a
renewed effort at increasing the effectiveness and international alignment of national regulations
and standards is essential. Such systems should be built upon scientific investigations supported by
research by the national universities.
Moving beyond ISO9000 is essential and development of a quality model that recognizes all of the
special circumstances of the Chinese approach to quality development is an essential step forward.
This national model can be used as a basis for developing quality maturity in firms and also as the
basis for praising firms by recognizing their achievements in the quality content of their products
and the effectiveness, efficiency and economy of the processes by which they produce them. The
criteria for such an award should reflect the national Chinese mindset and historical philosophical
approach to quality (e.g., the Tao of Quality rather than a Western model that is foreign to the
culture and lifestyle of the Chinese workers).
Education of professionals should become more systematic and should also focus on a systems
approach to integration as well as the current development of fields of specialization. The expanded
learning will help assure cross-functional performance of production and service systems so that the
requirements for customer quality delivery is not lost in the translation process from initial market
research to final installation or delivery of the product into the hands of the consumer.
Government and industrial leaders need to be developed to understand what the worlds leading
executives have done to drive quality improvement in their organizations to successfully achieve
high brand value, productivity and profitable growth. Thus, national policy must develop quality
awareness and expertise among the senior leadership of government and industry to assure that the
quality governance issues and social responsibility objectives are achieved in addition to the more
tangible product quality and profitability performance factors.

The development of macro-quality for a nation has never been attempted before. If China is able to
take great strides in this direction, then it will accomplish the goals that it has set for the coming decade
as well as the next half-century. The strong commitment of the central government for achieving high
quality, reducing waste, eliminating corruption and elevating the quality of life for its people, is very
convincing evidence that China has the national will to make this effort a success. When this is done on
a broad scale then the economic future of China will be assured.
___________________________
Gregory H. Watson is Chairman of the International Academy for Quality, Fellow and past-Chairman of
the American Society for Quality and Fellow and Senior Vice President of the Institute for Industrial
Engineers. He is Chairman of Business Excellence Solutions, Ltd. and Adjunct Professor of Engineering
Management at Oklahoma State University. He lives in Helsinki, Finland.
9