Quality, a shared responsibility - for now

"Made in Germany," "Made in Japan" -- all of these used to be warning labels. Actually, that’s how they started.

To protect the English market, the English parliament passed the so-called "Merchandise Marks Act" in 1887. Back then, German producers started to copy English brands by putting them on low quality German products. After the law was enacted, all goods that were delivered from the German Empire to England had to be marked with "Made in Germany." Eventually, production according to strict standards made German products surpass the English quality levels. "Made in Germany" developed into a characteristic for superb quality, which is still valid today.

Same in Japan after the second World War. Japan was known for copying products and swamping the markets with cheap knock-offs. “Made in Japan” was a sign to keep customers away. We all know how the rest of the story. Just like "Made in Germany," over time, and with a lot of effort, "Made in Japan" turned into a sign of quality. Warning labels turned into signs of excellence.

"Made in China" today stands where these labels stood. Let’s face it: Despite huge exports, “Made in China” doesn’t make a product easier to sell. My projection: "Made in China“ will become a sign of excellence, just like "Made in Germany," and "Made in Japan" did. Backed by the sheer size and might of the Chinese industry and its workers, "Made in China" will become a symbol for quality much faster than "Made in Germany," and "Made in Japan" did.

"Made in Germany" took 40 years to turn around. "Made in Japan" took 30. "Made in China" can do it in 5 years. But there is work to be done.

China needs successful brands to move up the value chain and to reap the benefits of added value. China is a country that produces a lot of products. China doesn’t produce a lot of brands. Actually, there are very few Chinese brands of true worldwide size and value. Also actually, most of the products China makes are sold – at a high premium - by other people who use wares manufactured in China in their branded products.

As long as China is mostly a huge production site for other brands, quality is a shared responsibility. With outsourced production, the heaviest share of the quality management lies on the brand owner. The brand owner must set the specifications, and must enforce them.

A brand is a Darwinian guarantee for quality. A brand is a sign for "the product you bought or saw yesterday, you can buy it with confidence. You will have the the same experience when you buy the product again." Fulfill that promise, and the brand will prosper. Disappoint the customer, and the brand will die. There aren’t many brands that make products that fall apart, that stop working, that disappoint customers. Simply because these brands soon die.

It used to be a slow death, because word took a long time to get around. The newspapers and TV programs weren’t full of stories of bad products. That would be bad for advertising income. With the Internet, word – good or bad – spreads quickly.

Look at Sony. Sony used to be a proud and successful brand. Now it’s a brand in trouble. One of the reasons are quality. Sony products have received a reputation of being chic, well designed, and to stop working once the warranty has expired. Google “Sony timer” and you will see Darwin at work: A once proud brand is being killed by unreliability.

Many successful brands aren’t based on great products. The Volkswagen was a quirky, cheap product. In many ways, it was worse than any of its competitors. But a Volkswagen was dependable and predictable. A great start for a great brand. Switzerland was known for expensive luxury watches. That industry nearly died when “Made in Japan” became a symbol of quality. The "Swatch" watch turned it around: Cheap, no frills, dependable.

Or look at Toyota. In a time when automakers tried to outdo themselves building exciting products with lots of features, Toyota became the world’s biggest car company by building rather bland, not very high tech, but very dependable products. Exciting cars often only excite the anger of customers, because the car is in the shop again because one of its many features doesn’t work.

One of the main treasons for the downfall of the U.S. auto industry is that it let quality slip. Americans abandoned their own brand en masse. More than half of the cars sold in the U.S.A. are foreign brands.

We are in a recession. A recession is a Darwinian process for getting rid of excess. Luxury products don’t fare well in recessions. Low priced, but dependable products survive during recessions, and thrive when the recession comes to an end. I’m typing this column on a small netbook. It was cheap. It is not fast. It is very practical. It works. Netbooks are huge sellers. I turn my netbook around. At the bottom, it says "Made in China."

Did I say that "Made in China" will become a sign for excellence much faster than "Made in Germany," or "Made in Japan?" When this recession comes to an end – and all recessions do – this will be the era of China. I am convinced it will. Depend on it.

Next time: Manageable quality is measurable quality

 About the author: Bertel Schmitt, Gasgoo's columnist, is CEO of Hong Kong based parts sourcing company Sinamotive. Before founding Sinamotive, with the assistance of U.S. venture capital, Mr. Schmitt was a marketing consultant to Volkswagen AG.