By Mikel Harry, PhD, and Richard Schroeder
The book’s subtitle is The Breakthrough Management Strategy Revolutionizing the World's Top Corporations, and the authors state: we believe that Six Sigma is the most powerful breakthrough management tool ever devised. In the pages of this book, the authors set out everything the reader needs to know about Six Sigma, both theory and practice, presenting a strong case for applying it in their own business. They write: Throughout this book, you will encounter new ideas and principles-some of which will run contrary to what managers have learned in school or professional practice. Six Sigma represents extraordinary sense, not ordinary or common sense; common sense rarely produces extraordinary results. It is our belief that once managers and their companies understand what Six Sigma is and how it works, they will begin to see that many well-accepted past management practices and quality-control methods are less than optimal, or are even wrong.
My Top 3 Takes from the Summary
Six Sigma is a business process that allows companies to drastically improve their bottom line by designing and monitoring everyday business activities in ways that minimise waste and resources while increasing customer satisfaction.
Six Sigma principles apply to any business of any size.
You can't change what you can't measure. The foundation of Six Sigma uses metrics to calculate the success of everything an organisation does.
What Is Six Sigma?
Reducing costs has always been the traditional approach to improving profitability, but Six Sigma changes this. With this management theory, the key to greater profitability lies in improving quality rather than reducing costs. The authors write: It is a business process that allows companies to drastically improve their bottom line by designing and monitoring everyday business activities in ways that minimize waste and resources while increasing customer satisfaction. Six Sigma guides companies into making fewer mistakes in everything they do – from filling out a purchase order to manufacturing airplane engines – eliminating lapses in quality at the earliest possible occurrence. Quality-control programs have focused on detecting and correcting commercial, industrial, and design defects. Six Sigma encompasses something broader: It provides specific methods to re-create the process so that defects and errors never arise in the first place.
The authors comment that most companies have been happy to achieve a three- to four-sigma defect level, explaining that this leads to fixing costs of around 20-30 per cent of revenue. When a company chooses to adopt a six sigma programme, defect fixing costs drop to less than one per cent of revenue. Another way to look at this is to consider that a three- to four-sigma defect level could be over 66, 000 defects per million opportunities, whereas a six sigma defect level will be less than one defect every 3.4 million opportunities. This gives a good understanding of why six sigma is considered ‘the breakthrough management strategy revolutionising the world's top corporations’.
They write: Industries are desperate to find new ways to buoy profitability. That is why companies as diverse as AlliedSignal, General Electric, Sony, Honda, Maytag, Raytheon, Texas Instruments, Bombardier, Canon, Hitachi, Lockheed Martin, and Polaroid have adopted Six Sigma. Many of these companies are averse to management fads. But they have embraced Six Sigma because they believe the initiative will help them increase market share, decrease costs, and grow profit margins. As a result, they are beginning to tie quality directly to their bottom line.
General Electric's Jack Welch, a self-proclaimed cynic when it comes to quality programs, describes Six Sigma as "the most important initiative GE has ever undertaken." GE's operating income, a critical measure of business efficiency and profitability, hovered around the 10 percent level for decades. In 1995, Welch mandated that each GE operation, from credit card services to aircraft engine plants to NBC-TV, work toward achieving Six Sigma. GE averaged about 3.5 sigma when it introduced the program. With Six Sigma embedding itself deeper into the organization's processes, GE achieved the previously "impossible" operating margin of 16.7 percent in 1998, up from 13.6 percent in 1995 when GE implemented Six Sigma. In dollar amounts, Six Sigma delivered more than $300 million to GE's 1997 operating income, and in 1998, the financial benefits of Six Sigma more than doubled, to over $600 million.
The authors use General Electric’s success story and others like it to demonstrate the very real benefits of undertaking a Six Sigma programme. They comment: By reaching for the seemingly impossible, companies achieve the impossible… Polaroid Corporation's Joseph J. Kasabula, quality strategy manager for product development and worldwide manufacturing, believes that the most compelling reason companies embrace Six Sigma is its impact on the bottom line. While other programs may improve quality, Kasabula believes they do not focus on increasing a company's profits. With Six Sigma, companies focus on the processes that affect quality and profit margins on a project-by-project basis. Six Sigma is helping Polaroid to add 6 percent to its bottom line each year.
We believe the Six Sigma Breakthrough Strategy should be of paramount interest to any forward-thinking executive, manager, and public administrator who wants to make his or her organization more competitive and profitable, and enhance its ability to drive change. Six Sigma principles apply to any business of any size. It applies to far more than just industrial processes-it applies to engineering, product design, and any commercial process, from processing mortgage applications, to credit card transactions, to customer service call centers. By attacking "variation" during the design of products and services, it's possible for any organization to achieve unprecedented profitability.
The Six Sigma Breakthrough Strategy
The strategy involves eight phases. They are: recognise, define, measure, analyse, improve, control, standardise, and integrate. Each phase is designed to ensure methodical and disciplined application of the strategy, and applying all eight phases leads to achieving Six Sigma performance in a company or process.
The eight phases fall into one of four categories:
Identification – The recognise and define phases fall under this category. In these phases, a company begins to understand the fundamental concepts of Six Sigma and to recognise the Breakthrough Strategy as a problem-solving methodology with a unique set of tools. The key areas addressed are recognising how processes affect profitability and defining which processes are critical to the business. A question that needs to be asked and answered is how much impact variation has across processes in terms of cost, cycle time, and defect rates.
Characterisation – The measure and analyse phases fall into this category. In these phase, a company should aim to establish baselines, benchmarks, and goals, thereby providing a means of measuring improvements from where they currently are. An action plan is then put in place to move towards goals, with the key characteristics of every process broken down step by step to provide a detailed analysis of each one. Every improvement made in each one of the steps will lead to improvements in the process.
Optimisation – The improve and control phases fall into this category. In these phases, the steps required to improve a process and reduce variation are identified. Experiments are run to pinpoint the key process variables, and the “vital few” found to be creating the biggest impact are then isolated. The information and knowledge gained here will ultimately improve profitability, customer satisfaction, and shareholder value as processes improve.
Institutionalisation – The standardise and integrate phases fall into this category. In these phases, ways to integrate the Six Sigma strategy into the day to day management of a business are addressed. This takes the focus beyond seeing a project through to completion to viewing the collective results of every smaller project on the larger projects and business as a whole.
The authors write: The first step in the Breakthrough Strategy is to ask a new set of questions, questions that take you out of your comfort zone, that force you to query what you have taken for granted, and that ultimately provide you with new direction. Six Sigma forces businesses to let go of bad habits. Bureaucracy becomes delayered. Those employees closest to the actual work and to the customer become motivated to meet or exceed consumer requirements. By questioning the speed with which products are produced and services are rendered, people begin to think about new systems that can be put into place to produce a higher-quality product or service in a shorter amount of time. As those closest to the work discover more effective and profitable ways of working, they are able to inform senior management about what changes need to be made, and as a result, push those higher in the organization to re-examine the ways in which they do business.
Your Yellow Brick Road
The authors continue: Six Sigma is about asking tougher and tougher questions until we receive quantifiable answers that change behavior. Through Six Sigma, companies relentlessly question every process, every number, every step along the way to creating a final product. Managers, employees, and customers ask different kinds of questions of each other than they've asked before. As Six Sigma takes hold across an organization, it creates an internal infrastructure that includes executives, managers, engineers, and operations and service personnel. When 50 percent or more of an organization's staff embrace Six Sigma, those individuals are able to mobilize massive changes in the way business is done, dramatically increasing profitability.
Questions, of course, are not meant to exist in a vacuum. The methodology behind Six Sigma is designed to pave the way to find the right answers for your company. In the classic children's story "The Wizard of Oz", Dorothy's persistent questions about what she sees and where she is going lead her down the Yellow Brick Road and into the Land of Oz. Similarly, when an organization starts to question what it does and why it does it, it too can begin to lay a Yellow Brick Road that will lead to its own long-term goals.
The fact is, organizations need ways of measuring what they claim to value. Measurements, or "metrics" as we prefer to call them, carry relevance to every member, for every activity, of an organization. You can't change what you can't measure. The foundation of Six Sigma uses metrics to calculate the success of everything an organization does. Enthusiastic speeches, colorful posters, and corporate mandates will not produce quantum change-only measuring the things a company values can do this. Without measuring a company's processes-and its changes to these processes-it's impossible to know where you are or where you are going. Six Sigma tells us:
We don't know what we don't know.
We can't do what we don't know.
We won't know until we measure.
We don't measure what we don't value.
We don't value what we don't measure.
So, in a general way, Six Sigma is a process of asking questions that lead to tangible, quantifiable answers that ultimately produce profitable results. This book will share what Six Sigma is, how it is applied, and what it can do for your company, business, or organization. It will be your guide for transforming knowledge into a living vision.
To date, every company that has followed our Six Sigma methodology has achieved breakthrough profitability. Our intention in these pages is to pass on to you the knowledge that has taken us nearly two decades to learn.
Six Sigma is a business process that allows companies to drastically improve their bottom line by designing and monitoring everyday business activities in ways that minimise waste and resources while increasing customer satisfaction. The detailed information in the book is clearly set out to provide a guide for company leaders, giving them everything they need to make fewer mistakes in every business process, whether that’s as small as filling out purchase orders or as large as manufacturing aeroplane engines. The aim is to eliminate lapses in quality at the earliest possible occurrence, but more than this, the reader is taken beyond thinking in terms of detecting and correcting errors to look at creating processes in which errors never arise in the first place.
The many Six Sigma success stories detailed in the chapters of the book bring the Breakthrough Strategy to life, helping readers to not only understand its value and importance, but also begin putting it into practice for themselves.
Bio of the Authors
Dr Mikel Harry (1951 – 2017) was one of the original architects and pioneers of Six Sigma at Motorola. He was responsible for the research and development of advanced Six Sigma engineering models and methods. He founded Motorola’s Six Sigma Research Institute, and in this position, he was responsible for the development of Six Sigma implementation strategy, deployment guidelines, and advanced application tools.
Richard Schroeder is president of the Six Sigma Academy. A former vice president at Motorola, he created the academy alongside Mikel Harry.