Book of the Week: Strategic Six Sigma

This week I would like to present another business book classic to you:
“Strategic Six Sigma – Best Practices From The Executive Suite”by Dick Smith and Jerry Blakeslee with Richard Koonce. Published 2002 by John Wiley & Sons.

When writing this book the author Dick Smith was the Partner-in-Charge of IBM Business Consulting Services Six Sigma Center of Excellence. He has over a dozen years experience in consulting on strategy, change management, and process consulting. Jerry Blakeslee was one of the architects of the IBM Business Consulting Services Six Sigma approach and serves as a Partner in the Six Sigma Center of Excellence, providing Six Sigma business transformation services to a broad range of organizations. Richard Koonce, author of three previous books, was a senior contract consultant to IBM Business Consulting Services and a nationally recognized expert on job and workplace trends.

I can only recommend reading this book, as Dick Smith, Jerry Blakeslee and Richard Koonce demonstrate that the Six Sigma methodology can and should be applied to the highest levels of strategic planning. The authors illustrate how the rigors of Six Sigma can improve your performance in terms of overall strategy, growth and customer satisfaction in the same way that it streamlines operations on a production floor. I strongly recommend this book to business leaders, executives and managers, all of whom will benefit from its hands-on advice for integrating the tenets of Six Sigma into corporate strategy.

When reading the book you will learn:

  1. How Six Sigma can be used to improve business strategy in the same way that it’s used to better operational performance
  2. How to apply Six Sigma to your company on both an operational and strategic basis
  3. Specific techniques for use in integrating Six Sigma methodology into your strategic planning.

In the mid-1980s, in the bustling manufacturing days of the Motorola Company, an idea was born. It was a new notion of how to cut costs, improve processes and accelerate product cycles. The new methodology that arose from this thinking, which relied on statistical measures of quality improvement, has become known across the business world by the phrase, Six Sigma. Six Sigma helps companies streamline the operational aspects of their businesses and improve their bottom lines. Today, however, business leaders are employing Six Sigma as a high-order leadership tool that enables them to:

  • Formulate new business strategies or implement existing ones
  • Respond to increasingly challenging consumer expectations
  • Facilitate mergers & acquisitions
  • Promote the adoption and implementation of e-business ventures
  • Accelerate revenue growth
  • Drive innovation
  • Push systemic and sustainable culture change
  • Manage financial reporting and business risk

Six Sigma has evolved into a vehicle for transforming organizations through the deploymentand implementation of corporate strategies. Former General Electric icon Jack Welch, for example, states that Six Sigma has “changed the DNA” of GE. Honeywell CEO Larry Bossidy credited Six Sigma with increasing productivity by six percent per year “forever.” With such powerful advocates in the corporate domain, small wonder the true strategic power of Six Sigma is now being fully appreciated. Performance Improvement The events of September 11, 2001, will cost global companies in excess of $150 billion. Hundreds of companies were forced to declare Chapter 11 bankruptcy. Experts say that a quality system failure in the U.S. intelligence system was partly to blame for the tragedy. There are many other examples of quality failures and their associated risks and costs. Consider the Chernobyl nuclear disaster. According to the Ukrainian Health Ministry, that disaster is now responsible for taking some 125,000 lives and striking 3.5 million people ill. Closer to home, the Challenger space shuttle disaster and the Bridgestone/ Firestone/Ford tire failures illustrate the unacceptable costs of letting quality slip. Today, failure is not an option. The key to maximizing performance and avoiding quality setbacks is the creation of an effective quality system — an enterprise-wide framework of carefully managed processes designed to ensure that the consumer’s demands are met and that the profitability of the business is preserved. Such systems must provide for accurate performance measurement, a task that is accomplished by applying Strategic Six Sigma principles and practices. There are four basic steps:

  1. Measuring the conformance of the enterprise to customer requirements
  2. Establishing processes that will reduce variations that lead to failures in conforming to customer requirements
  3. Developing new products and services designed to better meet customer and market requirements
  4. Repeating steps 1-3 continuously

You can use Six Sigma to improve performance incrementally and improve quality, or to enhance and integrate the strategic approaches that lead to corporate success. It is this strategic implementation of Six Sigma that will be increasingly critical to corporate achievement in coming years. Strategic Six Sigma can support globalization, M&A activity, e-business planning and development, supply chain re-design, enhanced customer relationship management, management of emerging technologies and much more.

To ensure that your company actually reaps the benefits that Six Sigma can provide, you must get beyond the transactional level in your implementation. The transactional level encompasses all the spaces in which everyday work is accomplished: the systems, technologies, interactions, exchanges, transactions, processes and management practices through which your business is conducted. Of course, you’ll need to pay a considerable amount of attention to the transactional aspects of your company. But enhanced Six Sigma implementation goes further. While companies can derive substantial productivity increases through careful attention to their transactional processes, applying Six Sigma to the transformational level, which includes culture, strategy, leadership, mission statements and vision, can re-create an entire company. The gains that can be achieved at this level far exceed incremental improvements available at the operational level. Experience has shown that deployment of the Six Sigma initiative is the key to success. Toward that end, you should:

  1. Build a committed leadership team. Six Sigma can’t depend on just one person. It takes a strong community of leaders at all levels within an organization to drive initiatives forward. Failure to create this guiding coalition for change is likely to derail even the most sincere effort.
  2. Merge Six Sigma with strategic planning. An organization’s strategic planning and deployment must be integrated with Six Sigma. Even today, many companies have a haphazard commitment to strategic planning. Frankly, turf wars and conflicting agendas among the senior executive teams of many companies make strategic planning a political football. Introducing Six Sigma into the planning process can enhance its clarity and direction.
  3. Encourage a passion for communicating with customers. It is important to take a consistent, disciplined approach toward your communication with customers. Customer intelligence should not be anecdotal. Critical customer requirements must be known and quantitatively measurable.
  4. Re-design the business along a process framework. Don’t fall into the trap of viewing your business as a series of independent silos or functions. You must bridge the gap between existing business activities and view them as a family of interrelated processes that must be synchronized and aligned to support overall enterprise goals.
  5. Develop quantifiable measures and demand tangible results. You have to agree on the metrics that will determine whether you’re headed in the right direction.
  6. Establish incentives and reward performance. Metrics only measure where you are now. By themselves, they cannot change where you’re going. Incentives and rewards are important in actually changing the behaviors of individual workers, as they embrace new values and attitudes such as team-based projects.
  7. Recognize the need for full-time commitment. Many companies fail with Six Sigma because they don’t fully staff the project with the right internal leaders to effectively implement and manage Six Sigma processes over time. You need to dedicate the best possible individuals to the mission of transformational change.

Larry Bossidy of Honeywell and Jack Welch of GE both experienced resistance to Six Sigma implementation within their organizations, so don’t be surprised if it happens to you, too. Welch resorted to outright arm twisting, insisting that without certain levels of training no one would be considered for a management job. Bossidy adopted similar standards. Welch experienced pushback from employees when trying to integrate Six Sigma thinking into daily business activities. The level of resistance became apparent when Welch asked senior GE managers to send their most promising employees to Black Belt school — the highest level of Six Sigma training. No one wanted to give up the best managers; all seniorlevel executives had their own goals to meet and wanted to retain their brightest people. Welch estimates that less than half of the early Black Belt candidates were really the best and the brightest — the others were basically stand-ins. Only persistent and emphatic pressure from the very top — in GE’s case from Welch himself — can overcome pushback. Of course, not every company has a Jack Welch to propel it along. For the rest of us, the best tool for toppling organizational resistance is a committed team of leaders who can establish a sense of urgency that cascades through the ranks of the organization. Start by generating some short-term project success stories that buttress Six Sigma thinking.

Six Sigma has a powerful impact on the strategic level when companies merge it into their strategic planning and roll out function. This ambitious undertaking involves aligning the core business processes with the needs of markets and customers, systematically eliminating defects from existing products and services, designing new processes, and implementing a new infrastructure and leadership system. If you think of Six Sigma not merely as a process improvement system, but also as a catalyst for change, you’ll have a better perspective of its strategic implications. Among its strategic benefits:

  • Definition of Key Performance Metrics. Six Sigma will help the organization define both the core enterprise issues it faces and the key performance metrics that will measure the organization’s success.
  • Prioritizing Specific Improvement Projects. Most business leaders say, “This Six Sigma thing has to pay its own way.” Some projects, the proverbial low-hanging fruit, involve quick results and immediate payoffs. Others are more long-term. One step is critical: assigning specific financial goals to each Six Sigma project that an organization undertakes.
  • Aligning the company leadership with the projects at hand. You’ll need deployment champions in place who can help bust through organizational roadblocks and bottlenecks at the divisional and regional levels. One of the keys to Six Sigma success is rapid deployment of Six Sigma professionals throughout the organization.
  • Enhancing communication with customers and the marketplace. Many companies fail to understand their customers because they assume they already do. Others don’t distinguish between short-term and long-term customer satisfaction. Still others have good data, but don’t share the data within the organization, keeping it bottled up in silos where it is ineffective.

A successful Strategic Six Sigma implementation can create a finely honed organizational machine whose core businesses are so aligned to the marketplace that they consistently meet or exceed customer expectations. Six Sigma becomes not so much a destination as a continual road leading to successful results, as companies build an ongoing business process framework to sustain the Strategic Six Sigma momentum.

The takeaways:

  • Most companies adopt Six Sigma to improve operational performance
  • Many companies undertaking Six Sigma are unaware of its strategic implications
  • Corporations like GE, Dow Chemical and Lockheed Martin have recognized the strategic power of the Six Sigma methodology
  • As corporate leaders experience the transforming power of Six Sigma, they frequently move to expand it throughout their organizations
  • In order to reap the full benefits of Six Sigma, it should be integrated into the strategic planning process
  • Strategic Six Sigma drives organizational change and aligns all aspects of a business with the overriding goal of exceeding customer expectations
  • Within this framework, Strategic Six Sigma encourages executives to view business units as interdependent processes designed to serve customers, not as silos
  • Strategic Six Sigma requires strong and committed support from the top
  • It’s not uncommon to encounter organizational resistance to Six Sigma
  • Strategic Six Sigma is a full-time, ongoing initiative

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