by Peter Merrill

Most in the quality community know that the draft international standard (DIS) version of ISO 9001:2015, which is to be finalized and published later this year, has included language regarding "risk-based thinking." Clause 6.1 is titled "Actions to address risks and opportunities." If you look closer, the revised standard has been designed to draw you into a business strategy, and bear in mind, if your business strategy does not include innovation, you have a bleak future.

In my September 2014 column,1 I discussed how implementing the revised ISO 9001 standard is an opportunity to move your organization toward introducing innovation. In this column, I will dive deeper and show you how to use the opening clauses of the standard to build innovation into your business strategy.

There are still people who carry with them the outdated ideas of the standard’s 1994 version and only think linearly. The ISO 9000 world changed 15 years ago, and the standard now requires systems thinking. The Baldrige criteria have always stressed the importance of "linkages"—links between the components of a performance management system— and ISO 9001 is sometimes criticized for not stressing this enough. But have no doubt, ISO 9001 is a management system, and according to ISO 9000:2005, clause 3.2.1, a system is a "set of interrelating and interacting elements.

In this column, I will focus on clauses 4, 5 and 6 of ISO 9001 and show how linkages are vital to make the system work.

Context and risk

Clause 4.1 of ISO/DIS 9001:2015 introduces the term "context," and this is where "risk-based thinking" starts. Context means you must ask, "What are the external and internal issues that affect your business strategy?" All of these issues introduce risk and opportunity. The standard is helpful and lists examples of these issues. You should work through them to find which are most important for you and why. Don’t forget you are thinking at a strategic level in clause 4.

The list of examples in the clause starts with the easiest issues. If there has been a change in the legal and regulatory requirements that affects your customer, then that immediately creates opportunity. For the customer, that may appear as a restriction. For you, it is an opportunity to ease the customer’s pain points by innovating. You don’t necessarily change your product, but maybe provide a new service to assist the customer.

In the marketplace, change—and therefore your context—is moving faster than ever. Much of the change your customer experiences is the result of technology. Technology eases some problems, but it also creates new needs. Again, find your customer’s pain and ask yourself, "How can you serve your customer in this new context?" At the same time, you should conduct competitive analysis and find what your competition is doing to ease your customer’s pain.

The other issues you must examine are the cultural and sociological changes that affect you externally. You are probably tired of hearing about social media, but this ties to technology, and simple matters, such as registering online for courses and conferences, has changed dramatically in just five years.

Customers also can voice opinions more easily as the world has become more transparent. This means customer feedback about your performance will be more available for people to see. Thus, clause 4.1 introduces opportunity thinking, and this is great fuel for the innovator.

If you’ve read the draft standard, you will have noted that clause 4.2 introduces interested parties and subtly gets users thinking about social responsibility (SR). Members of ASQ have treated SR seriously for the last five years. Some dismiss this as do-gooding, but increasing evidence shows it should be a vital part of your strategy.

Pepsi has demonstrated this in a major way in its own business strategy. According to CEO Indra Nooyi: "We looked at eating and drinking habits of the people, we realized there was a need to have healthier products and good-for-you products. Then we realized we cannot tell the customers that healthier products would cost more and may be tasteless. So, we adopted a strategy and that transformation worked well."2

Risks and opportunities

Moving into clause 5, the "input information" for leadership decisions includes the threats and opportunities your business faces. Expert and author Rita McGrath has done excellent work here, in many ways superseding expert and author Michael Porter’s original work on business strategy.3, 4 She showed how competitive advantage is transient. This underlines the need for you to evaluate your threats and opportunities continually in this fast-changing world.

Clause 5 on leadership encourages you to start to "set objectives compatible with the strategic direction and context of the organization." The importance of addressing opportunities in clause 4 now becomes evident to the innovator.

Clause 6 covers actions to address the risks and opportunities. This is where it becomes vital not to become risk averse. The internal context in clause 4.1 guides you to address internal issues, such as values, culture, knowledge and performance. If you’re not achieving the performance you want, you are instinctively becoming cautious, and this is why culture and values become vital.

ISO/TC 279 has been the launching point for the new ISO 50500 on innovation management. Clause 4 is where the whole issue of innovation culture is likely to be addressed. Innovation culture embraces exploration, collaboration and experimentation. You must address these in clause 4.1 as internal issues if you are going to break free of risk aversion and embrace opportunity, as Clause 6.1 outlines. Clause 6.1.2 notes that taking risk can also mean pursuing opportunity.

Evaluating risk

Risk is evaluated based on data. Information is gained from data analysis. As we gain more data, our knowledge of risk increases. In the same way that we evaluate threats and opportunities continually, we evaluate risk continually. Here’s an idea: When you start to document your ISO 9001:2015 system, don’t write "risk and opportunities"; instead write "opportunities and risks." It’s a subtle change, but it creates a whole different mindset. Don’t let your auditor tell you that you must write it exactly as it’s written in the standard.

Here’s another thought: When you write in clause 6.1.1 c, "achieve continual improvement," there is nothing to stop you from adding the words "and innovation."

Having assessed risk at a strategic level, you must decide what opportunities to pursue. The plan is developed and deployed in clause 6.2, which asks you to "establish quality objectives." This is where you include your innovation objectives and "retain documented information" on those objectives.

Clause 6.3 addresses planning of changes and reminds you that there will be those opposed to change—nowhere more than when you try to innovate. Niccolò Machiavelli said it so well. He was one of the earliest people on historical record to talk about innovation: "Those who innovate will have for enemies all those who are well off under the existing order of things, and only lukewarm supporters in those who might be better off under the new."5

Clause 6.3 addresses availability of resources, and this becomes one of your critical strategic issues moving forward. Resources are not just budget, but also people and their time. Don’t overlook political resources. Senior sponsorship of opportunities becomes essential. The people who oppose pursuing opportunities often will oppose them emotionally rather than logically. Find out what they stand to lose and have your sponsor address that loss.

There is a famous quote attributed to Dwight D. Eisenhower, "Plans are nothing, but planning is everything."6 To me, that means it’s not the document, but the discussion that is so vital. Planning is not a one-person conceptual activity; it is a vital conversation between business leaders in which you agree on what business opportunities you will pursue. It is also not a once-a-year activity. The plan must be monitored as it is deployed, and your management review is your forum for this. You will now see that management review is covered in clause 9 of ISO/DIS 9001:2015.

After developing your strategy, setting your objectives and creating your plan, you must deploy it properly or your strategy is worthless. Remember that the key word in systems thinking is "linkage." This is what ISO/DIS 9001:2015 will do well for you if you use it well.

Clause 5.1.2—Customer Focus and clause 8.2, where you identify customer needs in detail, prompts you to pursue opportunities. It’s those unmet customer needs from clause 8.2 that fuel specific innovation projects, and clause 7.1.6 on organizational knowledge are where you build in the ideation processes for developing conceptual solutions. The standard says in clause 7.1.6, "When addressing changing needs and trends … determine how to acquire additional knowledge. This is where we have learned the power of acquiring collective knowledge through ideation."

The areas of the standard I have addressed here are those we have traditionally neglected in the QMS. You now have a method to link your QMS to business strategy and innovation.

References and note

Peter Merrill, "Embracing Change," Quality Progress, September 2014, pp. 44-45.
World Economic Forum Annual Meeting, Davos, India, January 2014.
Rita Gunther McGrath, The End of Competitive Advantage, Harvard Business Review Press, 2013.
Michael E. Porter is the author of many books on strategy, including Competitive Strategy, Free Press, June 1998.
Niccolò Machiavelli, The Prince, 1532.
Attributed to Dwight D. Eisenhower in Richard Nixon’s, Six Crises, Doubleday & Co., 1962.