Management commitment essential for quality -- Premji

Like integrity, quality is not negotiable. So believes Mr. Azim Premji, Chairman of Wipro. In a relaxed conversation with K. T. Jagannathan, Mr. Premji elaborates on what quality means to Wipro and how the quest for Six Sigma has put the infotech major in a `win-win' situation all the time. Excerpts:

QUESTION: You lay much store by quality. And, your Six Sigma journey began in 1997. Where are you now?

ANSWER: To achieve what we have, it has taken about four years. Now we have culturised it. It has now become the way we work. It is a good and sound framework. The results are continuous. We measure the results. Targets are set for the results. We are now using it more and more in areas of interface with customers.

All the companies which have gone for it know how much commitment it requires from the top management. That has been our experience as well. Take any corporate initiative. Nothing is as bad as getting employees involved and then the top management getting out of it. So we are very careful in terms of what we start and how well we see it through. The major benefits are cost effectiveness, productivity improvements and significantly higher customer satisfaction.

All Six Sigma projects run as projects. There are project leaders called Green Belts and members. They work under a mentor called Black Belt. They identify problems, set goals for improvement. They measure goals from improvements on a weekly basis. They are forced to work as teams. That is a very powerful tool.

Do you have projects which do not subscribe to Six Sigma standards?

We have personal projects which are turbo projects. For instance, I ran a personal project to improve my conduct of meetings. You set criteria. This is the output you want from a meeting. These are the deliverables of a meeting. If it starts on time and ends on time. If the objective of the meeting is clear to people. Whether you are over-staffing or under-staffing the meeting. If the meeting achieves the objectives you have set out for, you get a sigma rating. So I ran the project for almost a year. I work under a coach. It helps me in terms of interpretations and guidance.

Cost savings

You started in 1997. What kind of cost savings were you able to achieve?

Roughly we could save costs equivalent to 8 to 11 per cent of the profit before interest and tax. It is quite substantial. It varies from company to company. Our margins run at 20 per cent plus. If you are able to save 10 per cent of that, you are adding to the margins by two percentage. That is a lot of money. But we measure the savings only for one year once the project is implemented. The reasoning is simple. We presume that the competition has got up with it. Or, the customer has taken away the savings from you. He expects that productivity increases every year. So in terms of our internal system, we measure savings for only one year. And this is the structured method - that is pre-defined. We get this audited by our corporate auditor.

Let us say some R&D is involved. May be you may have to spend that much time . There is no short cut. You are just groping in the dark for some solution. How would you address this?.

That is a separate story. We launched an initiative four months back on innovation and R&D. We are trying a structured approach in terms of how to get more ideas in the organisation and how to get people think more creatively in terms of a business-result situation. We have found that we are creating a lot of opportunities which are not taken to the market. We did not have a structured methodology on how to allocate it and prioritise. What we need to do is to get adequate critical mass in terms of doing it. We are using a different methodology. We have termed it as our innovation initiative in the corporation. But it is too early to talk about it. We have just started it. We are conducting training to define a system. We had project management training by an overseas faculty some time ago.

This we are not using so much in R&D. But we use it a lot in manufacturing improvements. In terms of product changes. Product re-configuration. Like in part of our engineering business. We make tippers. We have made a significant redesign of the whole tipper. You can say it is R&D. It is done for a significant cost cutting . You examine the kind of materials used. How do you make parts inter-changeable the way the Americans do? You may be having 30 models. But you have just three or four components which go into all those models. The basic framework is very similar. The Japanese are masters at this. A lot is possible in this. But this is not the methodology to use for creative R&D. It is a methodology where you can get the same output in terms of what the customer wants or improved output at a different configuration and, therefore, a lower cost or in a shorter cycle time. It is a very versatile technique. We are using it in a sophisticated manner in software projects - software project management, defects reduction and cycle time reduction.

Creative R & D

Creative R&D - do you have the system in place?

We are doing it under innovation. A separate initiative. We have already put it in place. We are in the first phase now. We have defined a system. We have identified the projects. And will prioritise them for the next one year. We have a business leader for each project. We do not call them projects but themes. Like say home networking as a theme. We have put together teams now. The teams are doing market evaluation. This is different from six sigma. But Six Sigma has provided us a foundation for this. That is a whole different initiative in itself - specifically directed at R&D. Too preliminary to talk about it now.

We are using an external consultant for that. We generally do that. Sometimes it avoids all the trial and error. It costs some money. Still worth it.

What do the clients gain through your initiative?

They stand to gain either in pricing or in the quality or cycle time. That is the ultimate test. In a competitive market, it is a major selling point. In fact, some of our customers request us to give a one-day workshop. We have not gone into selling these services as a business as yet. What we do is to recommend them to one or two institutes which have the facilities to consult in these areas just like we used Motorola. We used them for the first two-and-a-half years as consultants.

It is not a simple methodology. It has a lot of statistical issues in it. Enormous amount of training is applied to understand the process methodolgy.

How does Six Sigma help you to compete in a trough situation?

We have used it in manufacturing extensively. Like in computer manufacture where we want to reduce line defects. Be it in engineering manufacture or software projects, we have used it extensively in operations. We have now started using it in sales. We are using it in about 40 per cent of our projects and have direct relationship with the customer.

Often what happens with the customer is that you get involved with training the customer's people. So it puts a lot of backload into your system. I think it is an important advantage to customers which we are willing to share because of the relationship and prospects of business from him.When you do a project what kind of assurance vis-a-vis saving do you give your customer?

When a customer negotiates contracts with us, he expects more services for the same cost. We commit to that in anticipation that we will be able to re-engineer the process. Let me give a typical case. We work with Telco and Ashok Leyland in tipping systems. They set a target price. There is no way we could achieve the target price with the current process, current materials and current designs. In seven months, we reconfigured the entire product to meet the end specifications at a lower cost. We redesigned and remanufactured the product. There is no way we could have done that that fast and that thoroughly without using the process methodology like this.

Where do you head now that you have set higher standards?

It is a never ending process. You keep working at it. Ultimately Six Sigma - defect free. Theoretically. But you keep on questing for it. The next standard is our innovation. We think the differentiating factor is going to be the innovativeness of companies apart from their operational excellence. But it is in a preliminary stage. We have only begun to understand what we can achieve.

Software scene

How is the software scene?

I think a part of the panic is over. The customer is realising that things have stabilised. Customers who were in panic have reduced the number of people, cut costs and got budgets reallocated. I am more optimistic about the next six months than in the past four months.

What is the rational for your optimism?

The results. Satyam, Infoysys, Hughes and Wipro have all given good results. June had been a tough quarter.

A unique thing in our country is the lead time for entrepreneurship to set up capacity is very short. The moment there is money in a business every one jumps into it. Then capacity gets built. The moment capacity gets built and if you don't have a differentiataor, you start cutting price.

Suddenly everything has converged. The demand for engineers has fallen. If engineers are available , the demand for training non- engineers for software skills falls. It is natural when you build up capacity. It is bringing back a sense of reality to the industry. We have been in the hardware industry. We have seen the good and the bad times. The software industry in the past five years has not seen a bad time.

Is the demand for software services evaporating? Where exactly has it dropped?

Industry is growing so you have to add people. Dotcom demand is virtually gone. Demand in the sophisticated portal development and allied areas where there is lot of gizmos has become much less. But in solid upkeep work, solid execution of issues like SAP and CRM, the demand is still there. Our demand is still good in telecom, operating and embedded systems.

What is your vision for Wipro?

I will like it to be among the top ten service providers in the world. I will like it to be among the top ten most admired companies in the service industry.

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