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The team from the Federal Authority for Identity, Citizenship, Customs & Port Security in the UAE – named as one of two Quality Organisation of the Year winners at this year’s International Quality Awards, – was also a finalist for the Digital Innovation Award, for its work on a smart app that provides more than 100 identity, citizenship and residency services. Here, we take a closer look at its innovative entry.
Kate Smith, Managing Director at Capella Associates, discusses the challenges of knowing what the right thing is, and shares what a quality conscience looks like at her organisation.
To help ensure we deliver outstanding results for our stakeholders, Capella has a documented quality management system (QMS) and supporting processes, documents and resources. These are audited at least annually, and, led from the top, they focus on capturing and sharing best practice (not just pointing out non-conformances).
However, our management system doesn’t cover every choice, every decision, and every action that’s taken. Whilst we can aim to fully align with the QMS, it’s our ‘quality conscience’ that ensures we choose things that are best for the whole, make decisions that are best in the long-term, and act in a way that we’re proud about.
For me, quality conscience is about our individual and collective behaviours. Agreeing shared values and promoting these can help drive good behaviours, and these can be reflected through communications, role profiles, and performance management processes. Ultimately though, we are each responsible for our own behaviours, so the controls must be self-imposed. It is about choosing to do the right thing.
How do we know what the right thing is?
For those who are good at self-reflection, we can ask ourselves whether we’d be proud to tell family and friends about the things we’ve done, or whether we’d be happy to be on the receiving end of the action. Or we could take a more-structured approach and do an impact assessment, with questions such as “does the outcome have a positive impact on all stakeholders?”. Other people are often best placed to see things that we can’t see for ourselves, so it’s good practice to also invite others to critique, either informally through trusted colleagues, or formally through third parties. Capella has an Advisory Board with external members who provide oversight and scrutiny. We also use third-party certifications and awards to assess against best-practice frameworks. But all these practises require us to be open to seeing things we might not like, being willing to change, and being honest with ourselves and others. To build a strong quality conscience, these behaviours need to be valued, nurtured, and celebrated.
When we asked our team what “doing the right thing” meant to them, we were able to gauge the strength of Capella’s quality conscience. What we heard certainly passed the “I’d be proud to tell family and friends” test. Responses included:
- “Keeping the bigger picture in mind.”
- “Providing extra support for learners who need it even when there’s no budget.”
- “Looking for solutions and not giving up when things are tough.”
- “We always say to learners that if anything happens at home or work that could affect them or their programme, they should talk to us…we want them to get the best out of their apprenticeship…we let them know they’re not alone, we’re here to help and can point them to others if needed.”
- “Challenging things we know aren’t right.”
So, back to the opening question, “who holds you to account”? Of course, only you can answer this. You can look to your organisation since it has a role to play in setting standards, embedding them and adhering to them. You can seek help from others including third parties. You must also look within and ask whether you’re holding yourself to account and doing the right thing.
Read more on the World Quality Week 2022 theme, 'Quality conscience: Doing the right thing'.
For World Quality Week 2022, the CQI’s Chair, Amanda McKay CQP FCQI, discusses what doing the right thing looks like in the nuclear industry, and the changes that have occurred over recent years to incorporate a quality conscience from the start.
As a quality practitioner for over 30 years, I’ve seen lots of changes in both the sectors I’ve worked in, and the quality profession itself. Many organisations are now more aware of their social impact and the need to report on their approach to environment, social impact and governance. We are also seeing the board being held to account for not only financial and productivity performance, but also being a ‘good’ organisation.
Productivity and profitability do not always drive the right behaviours. I’ve seen that over the years, especially with quality, where corners can be cut when things are buried under lots of concrete or in difficult to reach places, sometimes technically within the specification. In recent years I have seen a change in the way quality is perceived at board level. In my early days it was about inspection and quality control, but we are now seen as trusted advisors working with the other functions in the organisation to do the right thing.
What does ‘doing the right thing’ mean
Doing the right thing means that we build in quality from the start. In the industry I work in, that means quality is part of the Gate 0 (pre discovery phase) considerations along with method, cost and schedule. We also think about the ethics of what we are doing, if it is the right thing to do, whether we should be involved with this organisation, or working with this country – this was not the case a few years ago.
Weighing up the repercussions
Looking at the current political situation across Europe, we have seen organisations and countries in a dilemma over doing the right thing, especially with energy costs rising. It would be easy to ignore the moral dilemma and take the cheapest/easiest option, but countries have taken the right choice. However, even the ‘right’ moral choice can have repercussions – for some countries, it has brought another environmental issue with the return to coal and delaying the decommissioning of nuclear power. These are difficult choices but overall are made for right reasons.
As a profession, our principles have been about doing things right and right first time, but that isn’t always the same as doing the right thing. Our core competencies as a profession – being governance, assurance, improvement and leadership – should lead us down the route of being the consciousness of the organisation. Within quality, we tend to be embedded across the organisation and sighted on all aspects of the strategy and operations, so we are in a good place to understand and advise on doing the right thing.
I’m looking forward to World Quality Week in November and the discussions and debates about ‘doing the right thing’ how we as a profession understand the concept and share the good practice across all sectors.
Learn more about World Quality Week 2022
Download resources, let us know how you are celebrating, and discover more to read on the theme, 'Quality conscience: Doing the right thing'.
The recently launched New Homes Quality Board, and the soon-to-be launched ombudsman, are a response to recommendations made in a 2016 report titled ‘More homes fewer complaints’. Upon closer inspection, however, the Code of Practice raises some concerns.
The All Party Parliamentary Group for Excellence in the Built Environment’s report ‘More homes fewer complaints’, published in 2016, is a report from the Commission of Inquiry into the quality and workmanship of new housing in England.
With the New Homes Quality Board established, and the ombudsman launching soon, the new arrangements aim to “plug the gaps in existing protections and aim to deliver consistently high-quality homes and considerably stronger consumer protections”.
The whole system is based on a Code of Practice based on 10 principles, and four sections covering:
- selling a new home
- legal documents, information, inspection and completion
- aftersales, complaints management and the ombudsman
- solvency, legal and jurisdiction.
At first glance, this code may seem adequate – we see similar codes in sectors such as automotive sales focussed on eradicating bad actors. However, dig a little deeper and some contentious requirements can be found.
In most other business-to-consumer (B2C) sectors, it would be deemed as unacceptable to delegate quality control to the consumer, or to require a reminder that the producer should carry out some quality control itself. However, the requirements suggest just that:
“The developer must provide for an opportunity for the customer to appoint an accredited professional to carry out a pre-completion inspection check.”
“At the point of completion the developer must have carried out their final quality assurance inspection of the New Home and provide a customer with a schedule of any incomplete works or defective items, and a statement of timescales for completing / remedying such items...”
This code implies an acceptance that some house builders operate without any form of quality assurance, and they and their customers will have to rely on final inspection and inevitable rectification. This does not happen in the automotive or mobile phone industry, perhaps partly because demand-and-supply is balanced in favour of the consumer and companies have to compete on quality.
Of course, some may say that building houses is not like manufacturing. I would argue that building a house is a repeatable and improvable process, much like manufacturing. The rest of the construction industry is enthusiastically embracing quality management. For example, the UK Get It Right Initiative (GIRI) has recognised that getting it right is key and can be developed with the right leadership, training, culture and management system. They have even worked out that getting it right first time not only satisfies customers, but also improves safety and saves companies money.
A quick read of some house builders’ annual reports indicates that there may be some quality-washing going on, with fine words about ‘right-first-time' and ‘creating value for customers’. Alternatively, they may indeed be on a quality improvement journey. One measure may be when we can remove all the questionable inspection details from the code of practice.
Find out how using ISO 9001:2015 can raise quality in Myanmar’s construction sector.
Today, many associate the household name, Toyota, with sustainability, partly due to the omnipresence of their hybrid vehicle, the Prius. For World Quality Week 2021, the CQI's CEO Vince Desmond, looks at the evolution of Toyota’s business model as an example of how this year’s theme – Sustainability: improving our products, people and planet – and the CQI’s Quality 4.0 principles link quality management with creating value for customers and society.
Leading up to the 1990s – the division of society and customer
Social value has always been important to Toyota, however, in the beginning, their focus was on creating value for customers by selling good quality cars at a good price, which was executed as a separate venture to social value. In this context, management’s role was to balance creating value for customers with creating social value.
Initially, Toyota created social value through the Toyota Foundation and its financial support of activities such as the Olympics. This division between the customer and product, and social value was very much the common bolt-on corporate social responsibility (CSR) approach at the time.
The 1990s shift – society and customer combined
The financial crisis of the 1990s caused Japanese society to re-examine its concept of value. Taking on board the lessons from the financial crisis, Toyota saw a future where the automotive sector would be demonised for its negative impact on the environment and recognised the need for a car which did much more than meet current emissions standards: they recognised the need to innovate, not just comply, in order to survive. In 1997, Toyota retaliated to the wasteful use of resources and energy with the Prius, a model that brought together the social and product components of value for the first time. Over time, Toyota has applied its improvement expertise to enhance both the Prius’ environmental performance for society and driving performance for the customer.
The recalls of 2010 – the trust and transparency agenda
A major lesson from the series of recalls in the USA – related to an accelerator pedal problem – was that Toyota struggled in changing customer expectations or providing timely information. The internet had grown into a platform for information sharing on a huge scale, but also introduced a huge variation in information quality. The company recognised the need to improve speed and transparency in its information provision to regain trust, focusing on safety and peace of mind as well as reliability.
The future – from making cars to providing mobility
The global automotive sector now sees a number of concurrent shifts in customer and societal expectations. As a result, Toyota has re-evaluated their approach to creating value; from making vehicles for customers, to providing accessible and sustainable mobility for society.
This is requiring Toyota to focus on concepts of sharing, de-carbonisation, accessibility, convenience and autonomy to move from being ‘best in class’ to ‘best in town’. To make this move, Toyota are focusing on collaborative partnerships within complex end-to-end value chains – such as their work with Softbank on autonomous public transport, and using the Toyota Foundations to fund research and support start-ups.
Technology, sustainability and quality management
During the recent ANQ Congress, I was asked what the connection is between Quality 4.0 and the volatility, uncertainty, complexity, and ambiguity (VUCA) world we live in. To me, the Toyota journey is a prime example of how the CQI’s Quality 4.0 principles and this year’s World Quality Week theme - Sustainability: improving our products, people and planet – link quality management with creating value for customers and society in a complex technological environment.
More on sustainability
Learn about how quality can play a key role in helping to deliver the UK’s sustainability objectives.
As we approach World Quality Week 2021, Nataliya Nasonova CQP MCQI, Project Quality Manager at Sir Robert McAlpine Ltd, looks back at how she and her team at the Battersea Phase 3A project have celebrated World Quality Day over the years, how the World Quality themes have influenced their work, and share their plans for World Quality Week 2021.
In 2017, Sir Robert McAlpine Ltd signed the contract for Phase 3A of the Battersea Power Station development. It was crucial for the team to establish a management commitment, so the project’s Quality Leadership Team (QLT) was founded to focus on First Time Right delivery. As part of this start-up, a quality policy was developed and agreed on between all collaborating partners on the project. That year, the CQI World Quality Day theme was ‘Everyday leadership’, so we integrated a quality leadership approach into the project culture. We learned that, to establish quality at the heart of our team, these eight key roles should be performed by leaders: the quality advocate, the stakeholder advocate, the systems thinker, the fact-based thinker, the quality planner, the quality coach, the quality motivator, and the quality collaborator. Using the eight key leadership roles, we were able to implement quality values and management commitments throughout the project’s quality policy, which helped to enhance every professional’s role as part of their everyday work.
In 2018, the CQI World Quality Day theme was ‘Trust’. Following CQI guidance, as a project, we focused on building a trustful relationship with all stakeholders involved and with a progressively growing integrated management team. The project recognised that trust derives from quality, and that it is important to build trustful relations for a successful project delivery. Together, we identified attributes of trust, such as transparency and consistency, and then collectively came up with actions to sustain them. To continue employing this culture and morale, the team put together a Project Charter of Trust, which was a symbol of team’s commitment to build and sustain trust.
In 2019, the theme of the year was ‘100 years of quality’, and it was the golden 100-year anniversary for the CQI. Together again, we 100 years of the quality profession and the significance of our work, engaging with the project’s key trade contractors, architects, consultants and the client, Battersea Power Station Development Company (BPSDC). With the help of the Construction Industry Training Board (CITB) and the Get It Right Initiative (GIRI), the team constructed a LEGO model, to demonstrate the importance of effective collaboration working together. In 2019, one of the most important mutual deliverables was a Phase 3A film produced by the project. The film, called ‘Inspired by Quality’, was shared with the wider project team to engage more members of the delivery team who worked on Phase 3.
In 2020, the CQI World Quality Day theme was ‘Creating customer value’. To celebrate, we gathered to think about the role of quality and the value it brings to our customers, with a focus on the Building Safety Bill and how it would help us deliver quality excellence. The bill was introduced in response to Dame Judith Hackitt’s independent review of buildings regulation and fire safety following the Grenfell tragedy in June 2017. We looked at the bill and the way it would transform how we record information and control quality on projects. We recognised the importance of digital technology to quality delivery, and the value in the certainty it provides for our clients. We also recognised the importance of taking pride in the customer value we create.
This year, we are preparing for the handover and successful completion of Phase 3A next year, and the team is looking forward to celebrating this year’s World Quality Week theme of Sustainability: improving our products, people and planet, which means a lot, not just for the project, but also for every business and organisation. Together with the QLT, Phase 3A and 3B teams will come together to take part in quizzes, games nights and workshops run by our Production and Sustainability teams, to raise awareness of the role of quality in sustainability. Our Sustainability and Community teams have also been working with local schools on a project that encouraged students to think about sustainability. We asked the students to design a bug hotel, and the winning design was then built out of reusable and repurposed waste material. This project showed how sustainability can bring the community together.
The CQI’s themes, knowledge, and inspirational ideas over the last five years have injected a good spirit and morale into the Phase 3A project, and has helped towards successful completion and handover in anticipation of 2022.
Find out more about Sir Robert McAlpine Ltd.
How are you celebrating World Quality Week 2021?
Tell us how you and your organisation are exploring the theme, Sustainability - improving our products, people and planet, via our webform, and you could be featured in one of our publications.
For leaders, translating strategic intent into results can be challenging. Take, for example, the UK government’s net zero target: despite political intent, there seems to be little in place to tangibly deliver the crucial objectives. That is why it is important for leaders to recognise the key role management tools, such as systems thinking, can play in delivering results.
Systems thinking can be defined as a holistic approach to analysis that “focuses on the way that a system's constituent parts interrelate and how systems work over time and within the context of larger systems” (Ben Lutkevich). In other words, systems thinking approaches problems and strategy as a whole, rather than looking at problems as individual pieces and trying to understand each part.
Systems thinking and strategy deployment
A good demonstration of systems thinking in practice is the UK Hydrogen Strategy, as it sets out a “whole-systems approach to developing the UK hydrogen economy”. However, political agendas can often interfere with systems thinking. This could be said for the UK Government’s strategy towards transport, for instance. The UK has incentivised the use of electric cars with the low emissions plug-in grant, yet we seem to lack the means to supply the charging infrastructure.
The value of systems thinking and strategy deployment should not be underestimated. The UK government has had a number of indicators from recent public inquiries that demonstrate what can happen when systems thinking is absent.
- During the Grenfell Tower Inquiry, engineer Dame Judith Hackett took a systems-thinking approach and found the system for managing buildings throughout the life cycle to be inadequate. She recommended a new system to address the problem.
- The review into the Nimrod disaster, led by Charles Haddon-Cave QC, found the management of safety risk in the aging aircraft’s system to be inadequate, and recommended a new system for the whole scope of military aircraft.
In order to scrutinise policy deployment, the government has what are known as ‘red teams’ – for example, the Climate Change Committee (CCC). In its 2021 report on progress in reducing emissions the CCC states that:
- “There is a large policy gap: credible policies for delivery currently cover only around 20% of the required reduction in emissions to meet the Sixth Carbon Budget.”
- “A significant ambition gap: current government commitments that align to the Committee’s published pathways cover less than half of the emissions reductions to 2035.”
- “There are signs of a multi-speed approach within government to raising ambition and putting in place effective policies.”
In other words, a lack of systems thinking and good strategy deployment mean we will miss the target.
A lack of systems thinking and strategy deployment can lead to the government failing to deliver objectives, such as the UK’s net zero target and other policies that are vital to a sustainable future.
Of course, there are many others who have been advocating for a more scientific approach to government – Dominic Cummings tried after a period of self-study on systems thinking and strategy deployment. Academia relentlessly do research into this area, and professional bodies with expertise in these areas dutifully respond to consultations. CQI Fellow John Seddon has made it a personal mission to help the government and the public sector to take a scientific approach to public service delivery.
A scientific approach
I also put forth my own suggestions that I believe would help to deliver government policies. Firstly, these suggestions are directed to members of the House of Commons and House of Lords in the form of ‘on-boarding’ education, that could be completed by every member before any voting process.
- Root-cause analysis and problem-solving – our elected representatives have to address complex problems at a variety of levels. Having a structured way to think about problems will get better results.
- Systems thinking – having an understanding of systems thinking will help both the House of Commons and the House of Lords in thinking about current problems. Moreover, it will help them to design and think about the implications of new policy intent, and help prevent risk rather than deal with it later.
- Strategy deployment – delivering on intent is challenging, and so understanding how strategy can be deployed through complex ecosystems of government departments, local authorities, industry and regulators will help when members of the House of Commons and House of Lords get their first ministerial briefs.
My final suggestion is for government to include quality management in its list of recognised professions for civil servants. There are already many CQI members doing great work in government, facilitating policy deployment and performance improvement, as well as developing the systems thinking skills with departmental colleagues. Some recognition and leadership for these people would help to demonstrate quality’s vital role.
It is clear that a lack of systems thinking and strategy deployment can lead to the government failing to deliver objectives, such as the UK’s net zero target and other policies that are vital to a sustainable future. This demonstrates quality management’s important role in sustainability and its impact in improving, products, people and planet – which is also this year’s theme for the CQI’s World Quality Week, from 8-12 November.
World Quality Week 2021
For more information, and everything you need for a successful World Quality Week, take a look at our #WQW21 resources.
A good quality professional thinks like a business leader because they have a keen eye on an organisation’s strategy and its leadership team’s concerns. That is why the C-Suite Challenge report by business and research body the Conference Board and KPMG’s 2021 CEO Outlook is of particular relevance.
Five common global strategic aims
The Conference Board identifies these top internal strategies:
- Accelerate digital transformation
- Improve innovation
- Modify business model
- Lower costs
- Streamline processes
The Quality 4.0 agenda
All of these strategies are relevant to the quality professional and the quality objectives they support. For example, de-risking digital transformation and modifying business models requires:
- The firm base-line provided by the business management system
- Someone with an end-to end view of the organisation’s value chain.
The CQI’s recent Quality 4.0 research shows that we are at the early stages of defining how the quality profession can support digital transformation. There is also a push for the quality function to exploit digital technologies to improve how products, services and processes are managed. These survey reports reinforce this importance.
The environmental, social and governance (ESG) agenda
The KPMG report shows that over 90% of CEOs predict that ESG will become more of a focus in their organisations because of regulation and stakeholder scrutiny. The Conference Board survey found that, as a result of the pandemic:
- 67% of C-suite respondents think that there will be greater emphasis on climate change
- 55% believe their organisations will be expected to address wider social goals
In the past, some organisations used corporate social responsibility (CSR) to enhance their reputation. Today, ESG is becoming a respected measure of an organisation’s impact on people and planet, so quality professionals have a key role to play in ESG policy and objectives.
How an organisation defines quality to their customers and stakeholders is crucial. This definition, driven by ESG objectives, can affect how organisations plan, design and manage business processes, supply chains, and the delivery of products and services.
The KPMG report, which also covers organisational purpose, found that 99% of CEOs said their “Corporate purpose has helped them understand what they need to do to meet the needs of stakeholders.” This is all very well, but how will they meet those needs?
The CQI has been contributing to the development of ISO’s new Corporate Governance Guide, ISO 37000, to make the link between purpose, stakeholders, strategy and delivery through business management systems. This guide is due to be released on 14 September 2021, to coincide with World Quality Week 2021 which focuses on sustainability. World Quality Week is also a good opportunity for quality professionals to show how quality management can confidently translate objectives into operational reality - with an eye on improvement.
Breaking down the boardroom door to make your voice heard is a challenge for most professions. However, the insights from this year’s C-suite surveys show that the door is open to those who have solutions.
Quality 4.0 has been a talking point within the quality profession for some time now, so it was a good topic to focus on at the CQI’s last corporate partner event.
The discussion centred on the first phase of our Quality 4.0 research programme and its results. These results include a working definition of Quality 4.0 and eight principles to help quality professionals respond positively and effectively to digital transformation. It was insightful to hear employer views and experiences on a range of subjects including big data, technology, context, assurance, improvement and leadership.
The group looked at what organisations have adopted, or need to adopt, to deal with big data. This includes data governance, architecture, engineering and analytics, and how business is now using this as a strategic asset.
- Data management – everyone agreed on the need to aggregate and compare data captured from a variety of business units, but the main learning is: keep it simple. Different projects are using data differently, so it’s important to get processes right before overlaying technology
- Data language – supplier visibility and lean systems will allow organisations to develop a common data language and align toolsets throughout the supply chain
- Data governance – investment is moving towards data governance, so organisations can produce quality forecasts. Quality could then become a tool that supports predictions as well as reporting
Our corporates recognise that they need to manage data architecture with tools and techniques to optimise data, and focus on areas where people can make decisions. A cross-functional integrated approach will help to achieve this and avoid unconscious bias.
Technology is a continuously developing asset and many different technologies are driving the need for Quality 4.0. Artificial intelligence, machine learning, robotics and blockchain are all major drivers. Employers acknowledge that while managing quality doesn’t tend to involve much use of technology, more experimentation is starting to take place including:
- Drone inspections
- Visual inspection automation
- Digital rehearsal
- AI algorithms to deliver assurance outcomes
Our corporate group also looked at the potential challenges of implementing Quality 4.0 and the knowledge they can take from their own organisations and other sectors. Some key points were noted:
- Boundaries – these are blurring within organisations and the supply chain
- Interchangeability – is powerful for customers, but will need to be managed closely . Flexibility and choice, however, could result in mistakes and impact negatively on the end result
- Traditional regulation approaches – have to align with a smarter, quicker industry, without losing confidence. The regulatory environment is still very compliance focused, and performance-based regulation is lagging behind
- Managing Quality 4.0 relationships – organisations are finding that to apply Quality 4.0 they need to navigate between regulators, customers and suppliers, whose understanding of, and appetite for, digital transformation varies
Another point raised is the desire to move away from traditional assurance methods, and investigate data and technology options that offer value and won’t become obsolete in a few years. Distributed ledger technology is an example of this. However, the design of data and analytics infrastructures must be flexible, so that audit fatigue is not replaced by fatigue from management and assurance system interfaces.
Big data and analytics will influence improvement so it becomes proactive (what could go wrong) rather than reactive (what has gone wrong). Real-time information and technology should give leaders and decision makers the performance information they need more efficiently, helping them to act quickly.
New quality partners are entering the profession, organisations that are experts in predictive analytics are proving their worth, and digital planning is showing itself to be an extremely powerful tool. Everyone understands that improvement can’t be led by one profession. To maximise opportunities, organisations must have a fully integrated approach.
Leadership and people
There’s a huge opportunity for the quality profession to lead organisational strategy in Quality 4.0, but that opportunity could become a threat if we don’t embrace change and progression. If Quality 3.0 was seen as having challenges, this attitude could make applying Quality 4.0 more difficult.
However, the following will help us prepare to meet challenges:
- Developing quality leadership skills around fluency in big data and technology
- Making cultural and leadership changes
- Supporting a shift from compliance and correction to risk prevention and performance improvement
- Increasing diversity within the quality profession
- Training quality professionals in new hard and soft skills
What does Quality 4.0 mean for the quality profession?
By embracing change and technology, the quality profession can play a big part in the way organisations harness change and progress. The CQI will continue to produce tools and assets to help keep our members and the profession informed about key developments around this crucial subject.
The test, inspection and certification sector is a US$250bn industry, and the recent acquisition of Lloyd’s Register Quality Assurance (LRQA) by Goldman Sachs is an example of growing opportunity in the sector.
Raymond James Investment Services estimates that US$100bn of the test, inspection and certification market is outsourced to service providers. The other US$150bn is shared by in-house companies (quality assurance functions) and governments providing similar services. With this significant proportion of outsourcing, it’s worth looking more closely at recent mergers and acquisitions (M&A) in the test, inspection and certification sector to uncover the reasons behind its growth.
M&A in the test, inspection and certification sector
Over the past 20 years, we’ve seen some significant M&A from service providers. Europe in particular is a dominant location for M&A in the test, inspection and certification market. Over the last decade 48% of the targets acquired were situated in Europe (Capitalmind). Many of the buyers who acquired a business in North America, the second largest region at 34%, are also headquartered in Europe. However, that was not the case recently, when USA-based Goldman Sachs acquired Lloyd’s Register’s test, inspection and certification services (‘LRQA’ as it will be once again known), leaving Lloyd’s Register to focus on the maritime sector.
What is driving test, inspection and certification acquisition?
While M&A activity in the test, inspection and certification world has often been about growth in a fragmented sector, some new and interesting strategic drivers for acquisition are emerging.
Environmental, social and governance (ESG) factors are becoming more important in acquisition. The statement from Goldman Sachs highlights this: “We are excited by LRQA’s strong ESG capabilities and the important role the company plays supporting clients managing their sustainable growth path.”
This year, sustainable quality is proving to be a priority for many, with several campaigns focusing on the topic:
Indeed, Raymond James takes the view that test, inspection and certification companies surprisingly agree on the changes that need to be made regarding the shift to ESG in business. Moreover, test, inspection and certification service providers such as Bureau Veritas, DNV and SGS are keen to show links between their offerings and the people and planet agenda.
Paul Butcher, LRQA CEO, said the Goldman Sachs acquisition “will provide the additional focus we need to accelerate our ambition of becoming a leading digitally enabled assurance provider, at a time when our customers face an increasingly challenging operating landscape.”
A 2018 BCG report estimated that over the next decade, digital technologies will affect approximately 40% to 60% of the current test, inspection and certification market. The early findings from the CQI’s Quality 4.0 research show that there are opportunities but also difficulties in developing systems of digital assurance that connect across value chains. We will undoubtedly see the big test, inspection and certification players expanding their technological and digital capabilities in the near future.
Nation states are again looking at how voluntary test, inspection and certification can support both regulation and competitiveness. Examples include:
- The USA Food and Drug Administration’s 2019 strategy for the safety of imported food, which embraces mutual recognition of other regulatory regimes, sector schemes and test, inspection and certification offerings
- The UK Government’s White Paper on Regulation for the 4th Industrial Revolution, which recognises the role of voluntary standards in getting innovation to market safely and quickly.
What do these developments mean for the rest of us?
- Quality assurance functions – US$150bn of the market is still performed in-house by company quality assurance functions and regulators. The same digital assurance technologies that test, inspection and certification firms want to implement will be available directly to industry and sector schemes to manage complex value chains. The Enfit Bulkvision scheme springs to mind, as featured in the Spring 2021 edition of Quality World.
- Management systems standards writers – if performance evaluation moved away from traditional internal process and product audit, then Annex SL – the framework for all flavours of management system – may well need a rethink
- Auditors – the accreditation sector should become more important in delivering trust and confidence to support regulation. It will also be key as consumers demand more transparency from supply chains and the businesses from which they buy. However, the accreditation sector will also need to adapt to respond to digitally enabled ‘Assurance 4.0’. If we consider a time when 80% of the fieldwork currently done by third party assessors is automated, the world will need new system and data interpretation skills.
We are some way off from automated digital assurance, but, if investors are any indication, that is the direction of travel. The BCG report suggested that “Traditional TIC [test, inspection and certification] players are getting more and more competition from start-up and incumbent TIC companies with a digital focus.”
Perhaps it is time for me to get my own TIC-tech start up going…
Find out more about the growing impact of digital developments on the quality profession in the CQI's Quality 4.0 research.