Continuous quality improvement is the hallmark of successful companies, worldwide. Many successful Japanese companies have adopted continuous quality improvement as the number one operational principle for all employees and departments. Chrysler, Procter and Gamble (P&G), 3M, Compaq Computer, Microsoft, and many other less well-known U.S. companies clearly practice continuous quality improvement. P&G is famous for consciously developing and introducing improved versions of its own current products under different brand names as a method for continuous quality improvement and significant technological advances (e.g., improved effectiveness in laundry soaps).

But continuous quality improvement does not always mean a limited quality improvement. Entire new product categories can be created by exploiting anomalies in quality and customer satisfaction. P&G created the disposable diaper industry with a significant advance in technology. Federal Express created the overnight letter and package delivery industry, now over $30 billion worldwide, by a significant advance in quality and customer satisfaction.

Does your company need to consider significant changes to provide improved quality and customer satisfaction? Is your company a leader, follower, or niche competitor in your industry category? Most small companies do not compete head-to-head or just follow larger, better-financed competitors. They usually seek a specialized niche of products or services.

A key insight into the need for significant change in quality or customer service is to examine:

1. the history of the company — how it first became successful
2. the history of the category — how it grew or changed
3. the history of competitors — how they grew or changed
4. the behavioral needs of customers — have they evolved?

What factors made your company successful? Does your company still have this edge? For example, many small companies are successful because they specialize in a small-volume category segment that a larger company could not make money on or would not commit resources to. Many small snack food companies exist because larger competitors, such as Frito-Lay, will not consider entering a business that does not have the potential for a minimum of $50 million in sales per year.

Or a small company may focus on a narrow segment of specialized customers. For example, think about a machine shop that produces only high-tech machinery for analyzing exotic metals for the aerospace industry. There may not be enough business for more that one or two such supplier companies in the country (or world). Being sensitive to changing customer needs, wants, and evolving technology or service requirements is critical for such a small company to survive.

What has happened to the product category you compete in? Has it changed, grown, shrunk, or evolved with changing end-user needs and wants? What is driving the evolution of the category? Is it new technology, changing customer behavior, or the advent of new information systems? How do you evaluate your company's ability to compete in its current categories? Is your company still successfully occupying its specialty niche? Or is it eroding or changing?

The rapid pace of information systems and technological advances may not only create new competitors, it may provide substitutes for your category's products and services that did not exist a few years ago. For example, it is becoming more common for fast food providers to compete head-to-head with local "standard restaurants" in business areas via fax orders. In the past, fast food restaurants did not consider regular restaurants as direct competitors because of their larger and slower menu preparation. However, standard restaurants now advertise directly to businesses for "fax-ahead menu" selection, so that customers' meals can be ready within minutes of arrival, exactly like a fast-food place.

If your company has lost its niche, is less distinctive in its products and services, or is contemplating starting a new business, significant improvements in quality and customer service or satisfaction may be required to survive. At the same time, do not overlook the possibility of small improvements in company functions.