Introduction and Overview
What are companies looking for today? They are questing for top and bottom line growth. Executives are constantly looking for ways to reduce their total cost structure while concurrently growing the top line. These business leaders want to increase capacity without capital investment. They know that customer satisfaction must be improved. They also recognize the need to enhance investor relations. And the list goes on and on.
Unfortunately, far too many business leaders are unaware that the average company (four sigma) leaves 25-30% of every sales dollar on the table – owing to a loss of capability and capacity, all of which is largely due to poor quality. Some of these corporate professionals have not been exposed to the huge gains made by such companies as General Electric, Honeywell, Sony, Ford Motor Company, and DuPont, just to mention a few. As many now know, these fine organizations found the “magic formula” in the chemistry of Six Sigma.
Since its inception in the 80’s as a quality initiative at Motorola, Six Sigma has evolved into a world-class business management system. It provides a means to reach the control function of a corporation and positively alter the genetic code of its leadership. Six Sigma has the capacity and capability to improve all of the critical processes of a business – in every corner and in everything it does.
In other words, Six Sigma forces an organization to reexamine the way in which it gets the work done and not simply modify or augment the existing system to realize some marginally acceptable level of improvement. Six Sigma is more than quality improvement – it is a system of management that produces quantum change in everything it decides to focus on.
Interview with Dr. Mikel J. Harry
Q1: From the bird’s eye, what is Six Sigma?
A1: From the customer’s viewpoint, Six Sigma translates to higher quality products and services, delivered on time, at the lowest possible cost. In this sense, Six Sigma represents a tremendous value proposition. Through Six Sigma, a customer is better able to access the products and services they need; when they are needed; enjoy a significantly higher level of product and service utility; and pay less to receive such benefits. So, in the customer’s head and heart, Six Sigma is about the creation of value. This makes Six Sigma a value proposition.
Within a business, the idea of Six Sigma (per se) is many things to many people. It largely depends on one’s level in an organization and their respective job role. For example, at the enterprise level, Six Sigma is often deployed as a strategic business initiative. In this context, it is focused on making quantum improvement in business growth, capacity, investor relations, and customer satisfaction, just to mention a few.
At the operations level of an organization, Six Sigma is mostly tactical in nature. Within this organizational tier, Six Sigma is usually implemented to improve such things as delivery delinquencies, cost-of-poor-quality (COPQ), total-defects-per-unit (TDPU), and a host of other critical measures that reports on operational effectively and efficiency.
At the process level of an enterprise, Six Sigma is used to reduce variability. Of course, the reduction of variability results in such things as product defect improvements, shorter process cycle-times, and lower direct costs. At this level, the motto is simple: “If you make an improvement, then by day’s end, the gains should be verifiable.”
In this context, the elimination of a defect, mistake, fault, or error with the “system” must directly translate to a measurable benefit, such as a reduction in headcount, less material, lower fixed cost, lower variable cost or lower overhead cost.
As such improvements are progressively pooled upward within the organization, the final basket of benefits becomes surprisingly large – meeting or exceeding the overall business goals and objectives of the enterprise. Through Six Sigma, the provider is better able to define, measure, analyze, improve, and control the creation and delivery of products and services.
Of course, this ultimately results in the mutual and satisfying exchange of value between the provider and customer (also called business). In this context, Six Sigma is concerned with the quality of business and not the business of quality – a major difference indeed.
Q2: What does it mean to be “Six Sigma”?
A2: We must first recognize that Six Sigma is not a philosophy-centric quality program like TQM. Neither is Six Sigma an alternative for ISO, which documents processes and generates reports for maintaining repeatable processes.
Loosely defined, Six Sigma is focused on minimizing errors in the core processes, products and services of an enterprise. In turn, this brings savings to the balance sheet in the form of increased profitability. A stricter definition of Six Sigma is maintaining 3.4 defects per million opportunities for defect.
By way of quantitative benchmarking, we know that an average company in world is about Four Sigma, which is equal to 6,210 errors per million opportunities for error. The airline industry provides a couple of examples that exemplify what this means in the real world. Four Sigma is equivalent to the quality level of airline baggage handling.
In contrast to baggage handling, a Six Sigma level of capability is generally equivalent to the airline flight fatality rate. In other words, a person is about 1,800 times more likely to arrive at their destination versus their luggage.
Even if a company only moves from Four to Five Sigma, the number of defects per million opportunities are reduced from 6,210 to 233. Interestingly, this difference translates to a 27 times improvement. So, just a one sigma improvement can drive an exceptionally strong value proposition.
As a rate of improvement, Six Sigma translates to a 78% rate of change, per year. This breaks down to about 12% improvement per month. Essentially, such a rate of change will move a Four Sigma organization to a status of Six Sigma in about 5 years.
So, whether we look at Six Sigma as a statistical goal or as a rate of change, the required improvement in breathtaking. But remember, the ultimate goal may be to achieve Six Sigma, but if the average organization can just get to Five Sigma they can dominate virtually any market in the world.
Q3: How does Six Sigma produce benefits?
A3: From a very high level, the first step involves establishing a set of strategic business goals for Six Sigma. Next, each goal must be translated into a financial target. In turn, the financial target is allocated to the profit centers of the corporation. Recognizing that a typical Six Sigma Black Belt can save about $1,000,000 per year, each profit center would simply divide the localized financial target by a million to determine the number of Black Belts the organization needs.
Once the number of Black Belts has been established, the organization then trains a small cadre of Six Sigma Champions to oversee the Black Belts and provide guidelines for project selection. After this, Black Belt candidates are identified and trained. Of interest, each Black Belt is assigned a “training project” that, when completed, returns bottom line results. Thus, the Black Belts hit the ground running, so to speak.
Q4: What are the boundaries of Six Sigma?
A4: First, there has been a host of well-respected global corporations that have directly experienced the promised benefits of Six Sigma. Most of these highly diverse corporations have carefully documented their Six Sigma journey and published their notable successes.
Many senior executives are outspoken on the merits of Six Sigma and corroborate its power as a system of management. In fact, Mr. Jack Welch (former CEO of General Electric) stated that Six Sigma was the most significant undertaking in GE history. He also said that Six Sigma, as a management tool, reaches the control function of a corporation. These facts speak volumes about the power and reach of Six Sigma.
Unlike the philosophical and prophetic nature of TQM, Six Sigma is a repeatable management process that is based on the idea of measurement. Unlike TQM, Six Sigma is a goal-driven, results-oriented, fact-based system of management – based on the principles of science. This is to say that any type or form of business improvement must be verifiable through the power of measurement – in everything that a company does or seeks to do, everyday in every way.
At any level of an enterprise, a defect or error requires a mix of resources to fix. If the given defect is eliminated (or otherwise prevented by process or product design), then the improvement is verifiable. In other words, the improvement is “real.” If an improvement is verifiable (i.e., real), then we should see a corresponding savings in labor, material, and/or overhead. If such a savings does not materialize or cannot be verified, then the improvement was not real. Such is the way of Six Sigma.
In a nutshell, Six Sigma is about the creation of global value, whereas TQM was generally limited to local quality improvements. In this sense, Six Sigma is about sudden and quantum breakthroughs in business performance (vertically and horizontally), whereas TQM was mostly concerned with making slow gradual change in product defect rates (at the local level of an enterprise).
Six Sigma is a top-down business imperative (based on cascading performance expectations), whereas TQM is a bottom-up quality program (based on disconnected quality improvements). Again, it is easy to see that TQM is mostly constrained to the business of quality, whereas Six Sigma is concerned with the quality of business.
Q5: How is Six Sigma superior to other improvement programs?
A5: Simply stated, Six Sigma has produced astounding economic benefits that have hit the proverbial “bottom line” of many fine corporations – in a verifiability big way and consistent way, year after year. We have a saying in Six Sigma work: “Let the data do the talking”. In the spirit of this principle, the financial performance of Six Sigma says it all, not to mention the quantum gains in customer satisfaction.
Today, very few corporate executives believe that TQM is a viable system of business management. To this point, a 1996 study titled “Measuring Performance after Meeting Award Criteria” was published in Quality Progress magazine. The conclusions were quite apparent – the impact of TQM practices are not nearly as significant as some think.
After examining data from Baldrige and state quality award winners, applicants and non-applicants, the study’s authors said they could not “conclusively determine whether quality award winning companies perform better than others.”
Even before this, TQM skepticism was already building. Consider the April 1994 article featured in Quality Digest magazine titled “Is TQM Dead,” editor Scott Madison Paton cited study after study that brought the viability of TQM into serious question. He indicated that: “Only 20 percent of Fortune 500 companies are satisfied with the results of their TQM processes, according to a 1992 Rath & Strong survey.”
In further support of this, Paton stated: “Florida Power & Light remains the only U.S. company to have won Japan’s coveted Deming Prize. Its winning strategy was largely dismantled after complaints of excessive bureaucracy and red tape.” Paton continued by saying: “A survey of 300 electronics companies by the American Electronics Association found 73 percent had quality programs in place, but, of these, 63 percent said they had failed to improve quality by even as much as 10 percent.” Of particular interest, Paton went on to say: “A study of 30 quality programs by McKinsey & Co. found that two-thirds of them had stalled or fallen short of yielding real improvements.”
Unlike TQM, Six Sigma is a management tool that astute leaders can employ to masterfully intertwine their personal destiny with that of the corporation. Only when this happens does the potential for “business magic” begin to surface. Not the smoke-and-mirrors variety of magic, but the kind of “real stuff” that dreams are made of.
The formulation of “operational magic” is what sound business is all about. When this type of magic begins to unfold, good leaders suddenly edge toward greatness, followers begin to consciously “work smarter and harder,” and the world (at large) takes notice. This is the magic of Six Sigma – it can transform good corporations into exemplars.
As great leaders wield the power of Six Sigma and begin to leverage the tools of breakthrough, they cross the threshold of destiny. At this point, the corporation prospers – as do the employees, shareholders, and all of those so connected. People from all over the corporation begins “rising to the challenge.” When this occurs, an unstoppable revolution is mounted.
Q6: What is the fuel that propels the success of Six Sigma?
A6: We must all remember that Six Sigma is the epitome and purposeful embodiment of “hope.” Remember, it is “hope” that moves people to suddenly align their values, aims, and goals in a common direction. This is what leaders do – they create “hope” where there is little or none. They know how to transform hope into belief. In turn, leaders take belief and forge in into a collective will (a type of force) that is capable of creating quantum change.
Leaders bridge the gap between hope and belief by creating visible and measurable success, not just one project at a time, but by the force of many, simultaneously. Yes, it is hope that drives the human spirit to accomplish great things. Hope is the muscle of Leadership. Without hope, leaders have nothing to “sell”. Without something to sell, they are just another player on the field of mediocrity.
The collective “shock and awe” of Six Sigma projects is one way to ignite the fireplace of executive hope. It is the sudden, collective, decisive, and repeatable success of Six Sigma that causes employees to believe their company is “the best.” When this type of attitude pervades an organization, it then becomes “boundary-less.” As this occurs, innovation takes hold.
Essentially, the Six Sigma initiative was designed to “raise the bar” so high it would force people to individually and collectively reexamine the way in which the work got done, not just tweak the existing work processes. Given this inaugural aim, it should be more apparent that Sigma is about innovating new ways of doing things, not just fixing things or incremental gain.
Q7: Why is Six Sigma so global in its reach and applicability?
A7: It must be remembered that Six Sigma is a universal improvement tool. It is a generic tool because it derives its power from the DMAIC application strategy – Define, Measure, Analyze, Improve, and Control. Through this strategy, it is possible to improve almost anything because the contributing problems are reduced to their deterministic root. In other words, we apply the fundamental principle that says: Y = f (X).
Of course, this is to say that “Y” is the outcome and “X” represents all of the essential inputs, and “f” is the ways and means (process) by which the critical inputs (Xs) are transformed into an output (Y).
So, for any given situation, we must define, measure and analyze “Y” and then improve and control the critical Xs. This holds true for any phase of the breakthrough strategy (i.e., DMAIC). To implement this time-proven strategy, we must execute the following steps:
Step 1: Define the essential Ys of a product, service, transaction, event, or activity. In addition, the related performance specifications (requirements) must be defined. This means that the critical-to-quality characteristics (CTQs) of a deliverable must be made known, as well as their respective performance expectations. In this manner, the “ought” condition of each essential Y is thoroughly documented.
Step 2: Measure each CTQ so as to establish a performance baseline. In this manner, the “is” condition can be made known and then contrasted to the “ought” condition. Of course, the difference between the “is” and “ought” condition of any given CTQ constitutes a performance gap, or “value gap” as some would say. At all times, it must be remembered, “we cannot improve what we do not measure.”
Step 3: Analyze the performance gap of each CTQ. To do this, we must look for patterns of poor performance, as well as patterns of good performance. Such patterns can provide great insight into how to the improvement effort should be continued and guided.
Step 4: Improve the gap by discovering the critical process Xs. Such Xs are also called critical-to-process variables or CTPs for short. Once identified, the CTPs must be set to their most optimal operating conditions. The intent of this step is to discover the “vital few” X’s that drives the performance of a CTQ. In other words, the goal is isolate process leverage by uncovering the factors that exert undue influence. In this context, we must focus on the “vital few” causes and ignore the “trivial many.”
Step 5: Control the optimal settings of each CTP so the performance condition of each CTQ does not change over time. Of course, if the setting of any given CTP were to change (slowly or suddenly), then we could expect to see an unfavorable change in the CTQ. When this happens, the probability of defects (or errors) is increased. Unchecked, such variations naturally leads to customer dissatisfaction.
Based on this understanding of the DMAIC improvement process, the question now becomes: “Should this process be made somehow different in form or substance as we change application scenarios?” In other words, is there a different improvement roadmap for a service-oriented business? Is there a different roadmap for a transaction-oriented business? Is there a different roadmap for a manufacturing-oriented business? Of course, the answer is resoundingly: “No”.
Hence, the practices, principles, methods and tools of Six Sigma are not bound to any particular set of application circumstances. Again, this is why Six Sigma is often said to be “boundary-less.”
Q8: How does Six Sigma balance against Lean Practices?
A8: The idea of “Lean” involves an array of tools that are generally qualitative by nature (i.e., independent of performance date), whereas the Six Sigma tools are quantitative in nature (i.e. dependent upon performance data). Analogously speaking, Lean is a collection of loosely connected methods that are suitable for gathering an organization’s low-hanging fruit – the fruit that hangs within arms reach.
The bulk of fruit, especially the sweet fruit at the top of the tree, can only be accessed by the methods of Six Sigma. In essence, Processing–For-Six-Sigma (PFSS) accesses the bulk of fruit – in the center of the tree. Design–For-Six-Sigma (DFSS) and Marketing-For-Six-Sigma, (MFSS) are the primary methods used to collect the harder-to-reach fruit at the top of the tree. While it may be harder to reach, its a much sweeter fruit.
The combination of Lean and Six Sigma – sometimes called “Lean Sigma” – represents an attempt to merge the benefits of both approaches; however, the success of this integration is spotty at best (in terms of cost benefit). Certainly, the combination of Lean and Six Sigma represents a trade-off between the power to solve difficult problems and ease of application.
While the principles of Lean are eloquently simple, easy to teach, and understood by all, the power of Lean to root out and solve persistent high-impact problems is questionable at best.
In terms of combining Lean and Six Sigma, it might be that a skeptic’s perspective is operationally justifiable, analytically warranted, and perhaps well advised. By all means, Lean has its place in the overall hierarchy of improvement methods, but perhaps its place is not at the side of Six Sigma, but rather at its base.
By no means is Lean a surrogate or substitute for Six Sigma – or vice versa. These two approaches are made relational by a complementary set of goals; however, they should not be made relational like two overlapping circles.
In a capsule, it can be said that Lean practices puts the “shop floor” in order, so that Six Sigma can reach the “sweet fruit” of breakthrough. In this sense, the fundamentals of Lean serve as a foundation from which to launch Six Sigma.
Q9: Is Six Sigma a management fad or business fundamental?
A9: When we first created Six Sigma at Motorola in 1984, many employees said it was a fad and would soon disappear from the corporate radar screen. In 1994 (ten years later), several noted magazines declared that Six Sigma was a fad and would soon disappear.
In 2004 (some twenty years later), there are a few that still say Six Sigma is a fad and will soon disappear, yet it continues to grow. While there are a few still saying its a fad in 2013, these hard-core resistors are now jumping on other unsubstantiated drawbacks, like Six Sigma stifles innovation. Of course, when properly deployed and implemented, Six Sigma drives innovation.
The tentacles of Six Sigma are now penetrating a much wider range of industries – banking, healthcare, pharmaceuticals, call centers, food preparation, hotels and information technology, just to mention a few. In fact, Six Sigma has just recently been adopted by many small to medium sized businesses.
If Six Sigma is a fad, it sure has been around (and growing) a long time – three decades and counting. That’s a really long time for a fad, per se. Of course, there will always be those that truly believe the Internet is a contemporary fad and will soon evaporate.
As a business fundamental, consider Raytheon Corporation. From the May 2003 ASQ Quality Notebook: “In 4 years the company [Raytheon] has realized more than $1.8 billion in gross financial benefit, has generated more than $500 million in operating profit and $865 million in cash flow. Raytheon has completed more than 2,500 projects in all parts of the business and qualified 18% of the employee population as Raytheon Six Sigma specialists.” Do you think Raytheon considers Six Sigma a “fad” that will soon disappear from Raytheon’s strategic plan? Of course, the answer is obvious. Why would you drop a program that yield such high returns?
It is very difficult to argue with success. While a single success might be called “luck,” several progressive successes are called a “trend”. After more than fifty (50) progressive corporate successes, it is safe to say that Six Sigma has become a “mega trend.”
Yes, Six Sigma is the “flavor of the month,” month after month, year after year, decade after decade. Why? Because it produces results – big results, consistently and immediately – the kink of results that shareholders and customers stand up and take note of, and then ask for more of the same.
Over and over, Six Sigma has proven its immense power to produce measurable, quantum gains far in excess of its related deployment and implementation costs. A simple review of the literature will more than substantiate this position. Corporations have had great success when they embody the principles of Six Sigma and follow the proven, time-tested deployment and implementation guidelines.
Of course, this assumes they are following the proven path derived from 30 years of experience. Today, far too many companies are designing internal hybrid programs that have no history of success. Naturally, they still call such programs “Six Sigma.” However, when failure results, they lay the blame at the doorstep of Six Sigma — even though their program wasn’t a true Six Sigma initiative.
Those organizations that have designed their own home-grown (hybrid) approach to Six Sigma usually don’t enjoy the higher levels of success that more classical forms of Six Sigma have brought to the table. In fact, many of these offbeat deployments have experienced high levels of failure – most often resulting in a “reset” and, in some cases, a total abandonment of Six Sigma.
Believe me when I say that there is nothing harder than trying to deploy Six Sigma a second or third time within the same company. If you don’t get it right the first time around, people loose their belief and focus.
Q10: What were some of the “lessons learned” at Motorola?
A10: In the beginning, Six Sigma was a tough sell. You must realize that in 1987 we were asking the company (Motorola) to make a 1,800X improvement in 5 years. At that time, we did not have an army of corporations that had already experienced the many known benefits of Six Sigma – we only had our own theories, beliefs, and hope.
Of course, there were many times we felt like throwing in the towel and calling it quits, but we somehow persevered the natural criticism, relentless naysayers, and the many other obstacles put in our way. It’s really tough when you are the first to breakthrough to new levels of business, operations, and process performance.
Perhaps our biggest discovery was that you don’t have to achieve Six Sigma to beat the competition hands down. Many times, a half-sigma gain (or less) will provide the market momentum necessary to capture and sustain more business. We discovered that Six Sigma sets the performance bar so high that it forced us to reexamine the way in which we got the work done, not tweak the existing system.
In addition, we discovered that there is no “point of diminishing return” where quality improvement is concerned (as the world previously believed). We learned that a progressively higher level of quality demands more and more innovation. It forced us to become more innovative in all of our functions. The better we got, the easier it was to see how to get even better. In a nutshell, we ultimately discovered that Six Sigma brought out the best in all of us.
People said that the goal of Six Sigma was not within the realm of possibility – nothing but a hollow dream that could potentially bankrupt the company. To strive beyond Four Sigma was futile, if not sheer insanity. Naturally, this message was underscored by many of the world’s leading quality consultants – even the American Society of Quality (ASQ) declared that Six Sigma was too difficult and not practical. In retrospect, it can now be said that their ability to predict a trend (like Six Sigma) was not on the mark. In fact, quite to contrary as Six Sigma still flourishes 30 years later.
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Copyright 2013 Dr. Mikel J. Harry, Ltd.