The New Six Sigma In Action?A Case Study
design for six sigma
Ron Brown is the general manager of a fully integrated business unit responsible for the development, production, and sales of products and services used in high-tech electronics applications. Ron recently replaced a general manager who had been managing the business for the past 10 years, and he found himself facing a number of challenges.
With a solid reputation as technology wizards, Apex and its employees built their success on a formula of one new technology breakthrough after another. As a result, Apex has sustained a 20 percent growth rate for the past 10 years. But after 10 years of growth, Apex customers have lost their appetite for investment in speculative technologies; they are demanding more performance at a lower price and more responsive service on currently installed products and systems. New competitors are finding ways to copy Apex products and deliver them at a lower price. As customer order rates dramatically decline, inventories quickly build, and Apex is finding it difficult to reduce product costs or attract new customers for its higher margin products. Cash flow is suffering, and Apex cannot fund new product development opportunities the way it had in the past. Needless to say, Ron is not sleeping very well these days.
Ron had noticed stories about companies like Motorola, GE, and Caterpillar that turned their businesses around with Six Sigma, and he wondered if the Six Sigma methodology could be applied to his situation. For assistance in applying Six Sigma, Ron went directly to the folks who invented and refined the methodology?Motorola University. He sought us out because of our experience, and he found it encouraging that we had faced situations similar to his in the same markets. He also liked that Motorola, unlike a consulting firm that gives advice it doesn't use, lives and breathes the methods we recommend to others. During a visit to Motorola University, Ron learned about how New Six Sigma techniques have dramatically turned around businesses just like his; as a result, he decided to enlist the Motorola University consulting services in his business improvement campaign.
Ron felt excited but apprehensive when he called a staff meeting to secure sponsorship support for the launch of the Apex Six Sigma business improvement campaign. He quickly found that staff members did not share his enthusiasm. Harold, the vice-president of Engineering, was no stranger to Six Sigma; he related the fact that, while he had successfully applied Six Sigma in several production areas, it seemed too complicated to some. He mistakenly thought it required a Ph.D. in Statistics to successfully implement. Harold's experience was that a Six Sigma project could tie up a team for six months with no certainty that the fix would be sustainable.
Barbara, the vice-president of Human Resources, voiced concern about the effect another initiative would have on employees' morale. Already experiencing initiative overload, employees were spread too thin with various team assignments. While Mary, the vice-president of Sales, was happy to hear that the engineers might finally clean up their product quality problems, she didn't feel that Six Sigma would do anything to boost her sales force's productivity. She had already invested too much in sales automation and customer resource management tools, and was patiently waiting to see a return on those investments. Mary also felt that Six Sigma, like other cost-reduction initiatives, could deflect attention from her efforts to improve overall customer satisfaction. Finally, Jack, the chief financial officer, expressed his reservations. He had seen too many dollars invested in total quality management programs that got organizations all whipped up with quality rhetoric while financial results continued to decline. In his view, Apex didn't have time to run another program?it simply needed to solve its obvious problems within the next 90 days.
Ron wanted to deal with these perceptions before moving forward, so he took out a flip chart and listed the concerns that had been expressed. He then countered with what he had learned about ways the New Six Sigma methodology could address these issues (Table 2.3).
| Common Misperceptions about Six Sigma | The New Six Sigma Approach |
|---|---|
| Six Sigma only applies in a manufacturing environment. | Six Sigma provides tools that enable teams to improve any type of process, both continuous and transactional. |
| Six Sigma is too complicated and requires a Ph.D. in Statistics. | Breakthroughs in desktop software and improved courseware enable teams to complete complex analysis and experiments quickly and easily. |
| Six Sigma projects can go on for months with no clear gains assured. | Clear project charters, upfront financial benefits analysis, and executive accountability ensure timely completion of projects as well as significant financial returns on every project. |
| Six Sigma projects add to employee overload. | Project prioritization and continuous management review ensure the optimization of team resources. |
| Six Sigma primarily focuses on cost reduction. | While cost reduction is usually an important outcome, all projects first focus on meeting critical customer requirements. |
| Six Sigma programs create more "initiative of the month" confusion. | Six Sigma can be the integrating force that brings current initiatives into alignment and focuses all initiatives on breakthrough business improvement. |
| Six Sigma is just another name for TQM. | While Six Sigma utilizes many TQM tools, these tools are applied for breakthrough business improvement and sustainable financial returns. |
| Six Sigma requires heavy investment, with no clear line of sight to return on investment. | Investments in Six Sigma projects are accretive?all projects are selected based on their ability to achieve clear return-on-investment goals |
Ron's stories were persuasive enough that his team, while still reluctant, agreed to move forward with launching a Six Sigma business improvement campaign. He recommended that team members, along with some of their key reports, should spend at least two days in an offsite workshop, learning more about the Six Sigma methodology and taking a hard look at their business to select their most significant improvement opportunities. Ron brought in an experienced Six Sigma executive coach to help the team through a leadership jumpstart workshop.
The Apex Business Group Leadership Jumpstart
The team spent a few hours learning about the New Six Sigma and hearing some of the same stories that Ron had heard about how similar businesses had turned themselves around using this methodology. By 9:30, they began to name potential projects that could benefit from Six Sigma tools. At this point, the executive coach reminded them of the first Six Sigma leadership principle?Alignment. To ensure the success of a Six Sigma business improvement campaign, the leadership team must step back from drilling directly into projects and instead make sure they are in agreement and clear on the winning strategy for their business. With no shortage of improvement project opportunities in this business, teams must only launch the projects that are most likely to improve Apex's chances of winning this year and then sustaining that winning edge for years to come. The team agreed to spend some time working on a winning strategy, which meant clarifying which customers Apex was trying to serve and what those customers were expecting from Apex. At the same time, team members needed to understand the expectations of other key stakeholders, like investors and employees. Once the team agreed on the expectations of Apex's customers and other key stakeholders, it would be in a position to articulate its mission, analyze its current environment, prioritize its strategic objectives, agree on some critical metrics, and finally begin the analysis of Apex's critical performance drivers and key processes for delivering on expectations. Team members now understood that all these activities would help them develop a shared understanding of their winning strategy and provide an integrating framework for identifying the higher-impact improvement projects. The task seemed daunting, but they were energized thinking about the possibilities.
Understanding the Voice of the Customer
The executive coach introduced the team to its first activity, designed to bring team members to a shared understanding regarding the expectations of their most important customers.
At first team members were surprised to find how disparate their views were regarding what was truly important to their customers. Many had not had direct contact with customers and found it difficult to relate expectation in real customer terms. They found that technical specifications and generic terms like "low-cost, reliable product" didn't capture their customers' true feelings. The team had been making many assumptions about what customers wanted that hadn't been validated with the actual customers. The exercise, outlined in Table 2.4, ultimately led team members to a prioritized set of statements that they believed accurately reflected customers' expectations.
| "In Order to Meet My Expectations, You Must Provide…" |
|---|
| The right technology at the right time for production application |
| Leading, enabling technologies for research applications |
| Reliable products |
| All deliverables on time with no surprises |
| Global, high-quality customer support |
| Industry leadership in cost of ownership |
Team members agreed that as a follow up to this activity they would test and validate these expectations with their customers and convert the expectations into measurable requirements. They also agreed that they would broadly communicate these prioritized customer statements across the organization to ensure that all Apex employees would be guided in their thinking and actions by the Voice of the Customer (VOC).
Developing the Mission Statement
The voice of the customer discussion also helped the team reflect on Apex's true mission?serving key customers by providing a set of products and services essential to those customers' success. Apex's ability to secure and sustain those customers would result from the company's ability to maintain a lead over competitors. The group then developed the specifics of those insights into a draft mission statement (Table 2.5).
| "Who Do We Serve?" |
| Customers in wireless, data storage, and semiconductor businesses |
| "What Services Do We Provide?" |
| Leading-edge/state-of-the-art, enabling Micro technology, combined with responsive global customer support |
| "What Is Our Unique Competitive Advantage?" |
| Proprietary source technology |
| In-depth application knowledge |
| Material expertise |
| Installed base of loyal customers |
| Breadth of leading-edge technology |
| Flexibility and cooperativeness in tailoring R&D solutions |
| A core of good, talented people |
Team members commented that the mission statement would be useful for keeping them focused on key activities and also for helping communicate a consistent message to employees.
Getting to Alignment on Strategic Objectives
The team was now prepared to take a critical look at the Apex business. They wanted to ensure that Apex's broad business objectives stayed in alignment with stakeholder expectations and that these objectives would truly help the company win in the market the team had described.
Team members began by seeking to identify documents that articulated Apex's strategic objectives. The first insight came when various team members specified six different documents, ranging from a presentation for the investment community to department-level goal sheets. They wondered aloud how employees could determine the best means of helping Apex when they were receiving multiple messages about Apex's objectives.
Fortunately, the documents had common theme, and the team agreed on Apex's top strategic objectives (Table 2.6).
| "What Are the Key Business Objectives Your Organization Must Achieve in the Next 3?5 Years?" | |
|---|---|
| Number | Objectives |
| 1 |
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| 2 |
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| 3 |
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| 4 |
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| 5 |
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| 6 |
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Going forward, the team agreed it would work from this common set of objectives, and department-level goals and individual goals would all flow from these objectives
Analyzing the Environment
Having reached consensus on customer expectations, mission, and key objectives, the team began to wonder if Apex could meet these expectations and achieve its objectives. The executive coach suggested that a quick scan of Apex's business environment might help the team build a common understanding of the company's current state and achieve consensus on areas needing improvement.
A situation analysis followed; the ensuing discussion and the resulting summary helped team members understand just how much things had changed in just the past 12 months (Table 2.7). In an environment characterized by rapid change in customer, competitor, and landscape, Apex was busy maintaining its internal status quo.
The team agreed that the situation analysis helped build the case for change within Apex, and that those changes needed to occur soon.
| "What Is Happening in Your Environment?" | |
| Customer | Internal |
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| Suppliers | Competitors |
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Analyzing Strengths, Weaknesses, Opportunities, and Threats
The executive coach suggested that a Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis would complete the picture of the current situation and potentially yield additional insight. The activity generated a discussion and summary chart (Table 2.8) that allowed the team to recognize Apex's extreme vulnerability to the emerging competition. At the same time, team members felt renewed hope that rapid action could allow Apex to regain and sustain a winning position.
| Strengths | Weaknesses |
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| Opportunities | Threats |
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The scan of the current situation caused team members to wonder how things had slipped so dramatically during the past 12 months. How could Apex have gone from 20 percent growth and 30 percent Profit Before Tax (PBT) to negative growth and falling margins in such a short time? Hadn't they all been working 80-hour weeks to restore revenues and recover margins? Didn't they have a performance-based culture where employees were held accountable for achieving specific goals, and weren't measurement systems in place to ensure that the company was progressing toward its goals?
Developing the Dashboard
At this point the executive coach introduced the team to the concept of a "dashboard." The coach explained that many organizations struggle to determine measures that drive accountability and behavior that improves business results. Organizations tend to fall into two problem areas. Either they narrowly focus on a single measure like revenue or profit, which causes them to lose sight of the activities that actually drive those outcomes, or they measure and track every possible activity, which creates confusion about which outcome the specific activity was supposed to impact. The solution is to get leadership alignment on a small set of measurements that are most likely to aid the leaders in monitoring progress toward their goals, while causing the organization to simultaneously balance their efforts across four dimensions: improving internal processes, achieving financial results, growing their customer base, and building employee capability. The team engaged in a process and discussions that surfaced key metrics and then reached consensus on both the metrics and stretch goals for each of the metrics. The resulting dashboard helped team members communicate the critical performance metrics and monitor progress toward the goal within each metric (Table 2.9).
| Key Metric ("What to Measure?") | |
| Internal Business | Customer and Market |
|
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| Financial | Learning and Growth |
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| Stretch Goal ("How Much?") | |
| Internal Business | Customer and Market |
|
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| Financial | Learning and Growth |
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The dashboard created a comprehensive picture for the team of what numerical goals Apex would have to achieve to successfully fulfill its key customer expectations and achieve its objectives. An examination of the dashboard triggered the obvious question?"How are we going to do that?" Hoping to relieve some of stress and move the team to a solution, the executive coach suggested that the team embark on a set of activities designed to answer this question. He then introduced the concept of performance driver analysis.
Surfacing the Performance Drivers
The executive coach described a performance driver as any process, system, or activity that causes a metric to increase or decrease. In its discussion of performance drivers, the Apex team learned that many different activities or processes could impact each key metric. Infact, the team faced a dilemma?for every measurement category, at least 25 performance drivers surfaced. Previously, the team would have assigned an individual to every one of the more than 100 possible performance drivers, with instructions to examine the driver and come back with a recommendation for improving its the impact. Instead, the coach reminded the team of a key principle of the New Six Sigma?using the leadership team to focus the organization. The application of that principle in this case meant that the team would have to analyze and prioritize its inventory of performance drivers to determine the small set of drivers that were most likely to have the greatest impact on the metrics. The resulting analysis yielded a prioritized set of performance drivers for each metric category (Table 2.10).
| Performance Drivers | |
|---|---|
| "What Factors Cause the Metric to Increase or Decrease?" | |
| Internal | Customer and Market |
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| Financial | Learning and Growth |
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The analysis and prioritization process helped "clear the fog" for this leadership team and helped it determine which actions to sponsor for driving rapid improvement. Team members began to see that a focused set of improvement projects targeted toward these key drivers could indeed put them in the fast lane on the road to improvement. They were now anxious to get started; they felt that it was about time they addressed key problems that had plagued them for the past year. But they also reminded each other that people had been assigned to most of these drivers at one point or another during the past year, and these individuals had trouble making progress. That comment prompted the coach to point out how the Six Sigma approach would increase their chances of breakthrough improvement even in those areas where they had tried and failed in the past. A key difference in the Six Sigma methodology is that, after prioritizing a focused set of improvement opportunities, the leadership team must mobilize teams with clear charters established by the leadership. To determine the nature of the team that would be assigned to each driver, as well as some of the specific deliverables that would be expected from these teams, the leadership team engaged in a second level of analysis of the performance drivers to help clarify what they expected to improve relative to each driver (Table 2.11).
| Performance Driver | "What Needs to Improve?" |
|---|---|
| Product/process documentation |
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| New product revenue |
|
| Portfolio |
|
| Communications |
|
The group members agreed that the analysis helped validate their selection of performance drivers, and they began to see how a focused team activity could drive rapid improvement relative to each driver. They now felt prepared to write team charters and nominate team members and team leaders.
Chartering the Teams
The Apex leadership team found the process of writing team charters more difficult than they expected. As managers, team members had been launching team projects by providing teams with very broad targets, expecting that broad assignments would allow the teams flexibility and creativity in pursuit of the goals. In reality, these broad assignments left the teams confused and frustrated, because each team member had a different interpretation of "what the boss wanted."
In this case, the New Six Sigma approach suggested that, to be successful, teams must be given clear targets, a specific set of deliverables, and reasonable but challenging timelines. Excited about the potential for breakthrough improvement, the team worked diligently toward creating its team charters. Through this charter development activity, the Apex leadership team members discovered how differently each of them initially saw each project. Left to their own devices, each member would have provided different direction and communicated different expectations to various team members, a formula for team frustration and confusion. Instead, members carefully worked through objectives, deliverables, metrics, and timelines for each team. By the time the chartering process concluded, the Apex leadership team felt confident that, not only had they identified the highest impact improvement opportunities, but they also now had the right team resources positioned to execute on those opportunities. See Figure 2.1
Figure 2.1. Sample Team Charter
Launching the Campaign
The Apex Business Group leaders felt like a team on a mission. They had successfully worked through their differences and now established a collective vision for Apex, a winning strategy, and clear agreement on their path to rapid business improvement. As the team prepared to launch the Apex Business Group Six Sigma business improvement campaign, its executive coach helped it determine that a successful Six Sigma business improvement campaign should include some key elements:
Acceleration
Leaders identified as project sponsors would receive two days of "Champions" training that would help them effectively coach their project team in the Define, Measure, Analyze, Improve, Control (DMAIC) Six Sigma framework. The team members would receive "Green Belt" training, enabling them to assist team leaders in the application of powerful statistical analysis tools through each step of the DMAIC process. Most importantly, the team leaders would invest 20 days of their time over the next four months to learn and practice the Black Belt analytical tools designed to help them conduct thorough data gathering, analysis, design, and experimentation in every step of the project. In parallel with this training, the team members would be moving through the milestones of their project plan, guided by an expert coach who would help them apply the appropriate tools and offer best practice examples as ideas to improve their work. With coaches providing application support, instructors supplying just-in-time learning, and the Champions conducting weekly project coaching, the Apex Business Group felt confident that these teams would achieve their breakthrough improvement goals.
Governance
With the Acceleration strategy in place, the leadership team members formulated a Governance strategy. As they learned from their executive coach, an explicit Governance strategy was essential to the success of the team because it ensured that the leadership team would continue as active sponsors of the campaign. As a part of the campaign, they agreed on a schedule of monthly review sessions for the sponsors of the projects and weekly coaching sessions for each Black Belt candidate with the Champions assigned to each project. This organized review structure would ensure that the teams were making appropriate progress, getting the resources and support they needed, and?most importantly?remained on track to achieve the desired business results. As a final but crucial piece of the Governance strategy, the leadership team agreed on a communication strategy for the Apex Six Sigma business improvement campaign. A process of using each level of the management team to communicate the Apex vision, mission, strategic objectives, and expected business results, as well as the initiatives and project teams that would enable them to achieve these results, provided the centerpiece of the communication plan. The Apex scorecard (Figure 2.2) served as the recommended vehicle for facilitating each level of manager?employee dialog
Figure 2.2. The Apex Business Group Scorecard
The Apex Business Group scorecard served as a one-page articulation of the Apex winning strategy and reflected everything the leadership team had agreed upon. Wide-scale distribution of the scorecard would facilitate manager and employee dialogs relating each employee's specific quarterly goals to the Apex strategy. The scorecard also provided the context for the Apex Six Sigma business improvement campaign. The campaign's straightforward objective was to apply team resources and powerful Six Sigma tools to ensure that Apex achieves its goals fast enough to deliver breakthrough products and services for its customers and breakthrough business results for its investors. With a firm understanding of the direction established in the scorecard and the results that the Apex Six Sigma business improvement campaign would achieve, employees could once again feel excited about their future. Most importantly, the Apex leadership team felt confident that it had established a course that would lead Apex to breakthrough business results as well as sustainable improvements well into the future.
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