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Six Sigma For Dummies
By Craig Gygi
John Wiley & SonsISBN: 0-7645-6798-5
Chapter OneDefining Six Sigma
In This Chapter
* Looking at a problem-solving methodology
* Reviewing the precise statistical term
* Recognizing that Six Sigma isn't just another initiative-du-jour
* Identifying a formidable business force
It's not often that a For Dummies book topic first needs a formal definition. After all, you know in general what gardening, dating, and even marathon training are. But "Six Sigma"? Even if you remember that sigma is the 18th letter of the Greek alphabet, why six of them? What happened to the first five sigma?
It's okay if you don't know what "Six Sigma" is at all, or don't understand every aspect of it. That's because Six Sigma-once a precise, narrowly-defined term-has grown over time to represent a number of concepts:
Six Sigma is a methodology for minimizing mistakes and maximizing value. Every mistake an organization or person makes ultimately has a cost-a lost customer, the need to do a certain task over again, a part that has to be replaced, time or material wasted, efficiency lost, or productivity squandered. In fact, waste and mistakes cost many organizations as much as 20 to 30 percent of their revenue! That's a shocking number. Imagine throwing 20 to 30 percent of your money away in the garbage every time you cash a check. It may sound ludicrous, but that's what many organizations do.
All businesses, organizations, and individuals have room to improve. No operation is run so tightly that another ounce of inefficiency and waste can't be squeezed out. By their nature, organizations tend to become messy as they grow. Processes, technology, systems, and procedures-the ways of doing business-become cluttered with bottlenecks, meaning work piles up in one part of the organization while other parts sit idle with nothing to do.
Work is often performed incorrectly, or the outcome is flawed in some way. When this happens, you scrap products and services and have to do the work over again: You consume additional resources to correct a problem before it's delivered to the customer, or the customer asks later for a "redo"-a new product or a more satisfactory service.
Sometimes, flaws and defects aren't the problem, but a product or service simply takes too long to produce and deliver. Think about the problems a mortgage company would have if it processed home loans perfectly, but did so 5 times slower than the competition. That's a perfect disaster.
Six Sigma was once a quality-improvement methodology, but now it's a generalpurpose approach to minimizing mistakes and maximizing value: How many products can you produce, how many services can you deliver, how many transactions can you complete to an expected level of quality in the least possible amount of time at the lowest possible cost?
Six Sigma takes effort and discipline and requires you to go through the pain of change. But soon the pain is transformed into improved performance, happier customers, lower costs, and more success.
The Managerial Perspective
While Six Sigma has its many definitions, Six Sigma action occurs on two different levels: the managerial and the technical. At the managerial level, a Six Sigma initiative includes many units, people, technologies, projects, schedules, and details to be managed and coordinated. There are also many plans to develop, actions to take, and specialized work to complete. For all of this to work in concert, and for the technical elements of Six Sigma to be effective, you have to set the proper management orientation.
Radical corporate success
Six Sigma performing companies realize staggering business success:
Six Sigma helps organizations achieve breakthrough improvement, not incremental improvement. In short, Six Sigma is a path to dramatic improvement in value for your customers and your company.
Bridge between science and leadership
From a management standpoint, Six Sigma culminates in the predictability and control of performance in a business or a business process, by applying the methods of science to the domain of leadership.
Early in the 20th century, Henry Ford applied the principles of science to the production of cars. By following set processes and by optimizing repeatable processes, Ford and others made goods that displayed little variation in their final states and could be mass-produced without requiring extensive education and years of finely honed skills among the assembly-line staff. We have witnessed how the achievements of machinery, technique, process, and specialization of labor collectively enable the explosion of mass-production and the consumer society. Science dictates how all the parts, materials, machines, and people on the assembly line interact to turn out many "widgets" at the highest possible speed and the lowest possible cost.
Managerially speaking, the goal of Six Sigma is to inject similar control, predictability, and consistency of results into the production of a successful organization, such that the widget comes off the production line absolutely consistently.
Countless times every day in the United States, people open a water faucet and experience the flow of clean, clear water. The reason is because reliable purification systems treat the water and pressure systems ensure the water is there. This is what Six Sigma does; it treats the processes in a business so that they deliver their intended results reliably and consistently.
The methodology of Six Sigma was first applied in a manufacturing company, but it also works in service and transactional companies (like banks and hospitals), where it has been implemented many times with great success. Six Sigma dramatically improves the way any process works-whether that process is in the chemical industry, the oil industry, the service industry, the entertainment industry, or anything else.
Management system orientation
Six Sigma is so appealing to managers because it delivers management results.
Clear value proposition and ROI
Six Sigma is characterized by an unwavering focus on business return on investment (ROI). A Six Sigma project can improve a business characteristic by 70 percent or more, stimulating increased operating margins for businesses, while at the same time increasing the value those businesses provide to their customers. Six Sigma initiatives and projects have a direct, measurable financial focus and impact.
Top commitment and accountability
A Six Sigma initiative begins at the top. The leadership and management of an organization must actively commit to the Six Sigma initiative, setting performance goals and developing tactical implementation plans. Management team members must be personally accountable for achieving the performance improvement goals they set for their respective organizations and business units.
Six Sigma, through its voice of the customer (VOC) tools, drives business processes through customer requirements. No operational, process, and business improvements can occur without a definitive understanding of who the customers are and what they need, want, and are willing to buy. Six Sigma managers become savvy about the needs and requirements of customers, in a way that also enables the business to become stronger and more profitable.
Connected business metrics
You know by now that Six Sigma is different from other performance improvement approaches in its focus on business financials and measurable operational improvements. To support this, the Six Sigma management system must include performance measures that are readily accessible and visible to everyone whose actions or decisions determine performance levels and operational quality.
Six Sigma improves the performance of processes-any business or work process-in how those processes effectively and efficiently transform material and other inputs into the desired outputs. This is the focal point of using Six Sigma to improve performance: the design, characterization, optimization, and validation of processes.
The Six Sigma project is the tool by which processes and systems are characterized and optimized. Program leadership identifies opportunities for Six Sigma improvement projects and assigns Six Sigma specialists to execute them. We provide details about how to select Six Sigma projects in Chapter 4, how to implement projects in Chapters 5 through 10, and how to manage projects using tools in Chapter 12.
Enabling tools and technology
Properly managing a Six Sigma initiative that spans an entire organization or a significant part of an organization requires the ability to simultaneously manage many projects, processes, analyses, data banks, training activities, and people. Generally speaking, several classes of tools and technology are employed to accomplish this:
We provide a comprehensive view of the many Six Sigma tools and technologies in Chapters 11 and 12.
An infrastructure for change
Installing and managing a Six Sigma management system require a certain infrastructure-an underlying set of mechanisms and structures upon which to develop the Six Sigma improvement strategies and enact the tactics of project implementation and process improvement. The key elements of an effective Six Sigma infrastructure include the following:
At the top, the focus is on the aggregate process, projects, and results for entire implementation business units.
In the middle, the focus is on the process and results of operational units with multiple Six Sigma projects.
At the lower levels, the focus of management review is on making sure individual projects are on track and yielding their intended process-improvement and financial results.
Complete culture change
A Six Sigma initiative often begins with outside consultants providing methods, tools, and training, but over time, the knowledge is internalized and applied organically within the organization. The ultimate goal is for everyone in the organization to have a working ability to understand customers' requirements, collect data, map processes, measure performance, identify threats and opportunities, analyze inputs and outputs, and make continuous improvements. In Chapter 3, we provide more details about culture change.
The Technical Perspective
Six Sigma performance is the statistical term for a process that produces fewer than 3.4 defects or errors per million opportunities. Behind that single statistic lies a methodology that includes a plethora of data, measurement, analysis, improvement, and control tools and supporting technologies. This section is an overview of the technical side of Six Sigma.
Product, service, and transactional quality
The technical objective of Six Sigma is to ensure the high quality and reliability of products, services, and transactions-the lifeblood of all businesses and organizations. Banks, government agencies, hospitals, car washes, toy makers, semiconductor plants, professional services firms-all organizations of any type-provide products, services, and transactions, or some combination of the three.
For example, most auto manufactures do much more than build cars. They also provides services, such as routine maintenance and warranty repairs, through their dealerships. Through their financing arms, they approve and process car payments, a transactional business activity.
The technical goal of Six Sigma is for products, services, and transactions all to be performed with the highest possible quality as efficiently and effectively as possible. This requires performance targets for all components in a system, and for each important characteristic of every component. For example, a car axle (component) has to have the proper form, fit, and function to perform as intended, and if it is to fit together with other components of the car.
Aiming for the target
In Six Sigma, important characteristics are referred to as CTXs, where the ITLITL stands for "critical," the T stands for "to," and the X represents what the characteristic is linked to: quality, cost, time, satisfaction, and so on. For example, a critical-to-quality characteristic would be called a CTQ. Graphically, you can depict the target values of any CTX in Figure 1-1.
Excerpted from Six Sigma For Dummies by Craig Gygi Excerpted by permission.
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