What is Six Sigma & How Can It Help My Business?
Can the Six Sigma methodology, so long known to be an invaluable resource for large manufacturers, also be used successfully by a small, entrepreneurial manufacturing business? Will it achieve goals and improve the bottom line?
The answer, of course, is “Yes!” But that’s only the beginning.
Six Sigma is not the flavor-of-the-month solution for all business problems. Instead, it’s a proven method for improving operations. As you prepare to start a business or look for ways to strengthen an already-existing company, it’s worth exploring and considering the advantages this quality improvement concept.
Companies that recognize the differences among feasibility analysis, pure business decision-making and Six Sigma can optimize their business performance. Six Sigma has become a key enabling skill of knowledge-based businesses, guiding companies to achieve specific goals and objectives.
WHAT IS SIX SIGMA?
Six Sigma is the careful, analytical thought process of solving problems using data. It is perceived as a breakthrough methodology, similar to the high-level skill a martial arts expert employs. Many of the world’s top corporations have used Six Sigma to increase profits by more than $100 billion in the past few years. Well-known leaders are GE, DuPont, Dell, Sun Microsystems, Bank of America, NEC, Hitachi and EDS.
The Six Sigma problem-solving methodology was originally conceptualized by Bill Smith at Motorola and later pioneered by Mikel Harry in the early 1980s. This groundbreaking work helped develop the Six Sigma recipe for success using known statistical tools and methods.
Six Sigma’s power lies in consistently using the methodology to improve confidence in predicting the expected output of processes, such as cost, quality, and delivery. Six Sigma “deployment” is the rollout plan of the Six Sigma methodology across an organization.
Statistically, Six Sigma performance defines a process that produces fewer than 3.4 defects per million opportunities for an error or defect. That’s a 99.999 percent on-target capability. Operationally, Six Sigma defines the continuous effort to reduce variation, improve the predictability of process outputs, and sustain improvements.
What is the statistical significance of the “six” and the “sigma?” A common measurement of variation, the Greek sigma symbol is used to represent “standard deviation” in a group. The practical notion is that “if a process can contain six standard deviations between the mean (average) and the nearest specification limit,” then the process has little chance of creating out-of-specification results. Most processes cannot sustain a Six Sigma state. Over time, 4.5 sigma above or below the mean has been considered a reasonable, sustainable goal.
THE TWO SIX SIGMA METHODOLOGIES
There are two basic methodologies employed in Six Sigma: DMAIC and DMADV.
DMAIC stands for Define, Measure, Analyze, Improve and Control. It focuses on improving existing processes that have not reached process “entitlement,” or an optimal state.
DMADV stands for Define, Measure, Analyze, Design and Verify. It focuses on ensuring that new proposed processes or those that have reached entitlement are implemented with minimal defects.
The following actions are important to the success of Six Sigma:
- Clear top-management support of Six Sigma as the organization’s process-improvement methodology.
- Commitment to using experienced Six Sigma professionals, including the development of internal resources and sponsors.
- Linking company business goals and objectives to performance goals and metrics that can be measured wherever needed.
- Using Six Sigma consistently to meet the goals that optimize shareholder values and lead to delighted customers.
Now that we’ve established some foundational Six Sigma knowledge, let’s take a closer look at how you can apply Six Sigma to your business.
SIX SIGMA AND YOUR COMPANY
How can you use Six Sigma methodology?
First, determine whether your business processes need to improve. Do they all perform optimally in cost, quality and delivery? If the answer is yes, you may need to complete a “measurement system analysis” to determine if the metrics your company uses are accurate. Almost every business process can be improved using Six Sigma methods.
Once you’ve established a need, you develop a “deployment strategy,” most often with the help of trained Six Sigma professionals on staff, as consultants, or both. Deployment follows these general steps:
- Perform a self-assessment to determine whether your business infrastructure enables the use of the standard consistent metrics and key process indicators needed to establish a baseline of current performance.
- Define gaps between current performance and the performance your customers expect. Modify or create new metrics, targets and specifications as required.
- Build a strategy map using tools such as the Balanced Scorecard, which link business processes to strategic direction.
- Use a Six Sigma consulting team to assist in deployment. Poor deployments usually result in poor performance.
- Develop internal resources using Six Sigma training and ensure the methodology becomes your company’s standard business process to “sustain the gains.”
Depending on the company, savings can range from $150,000 to $250,000 per green-belt (intermediate) project to more than $1 million per black-belt (complex) project. Under Six Sigma, cost is a leading indicator of improvement. But the numerous qualitative business benefits also impact customer satisfaction.
What is your business risk without Six Sigma? Small and medium entrepreneurial businesses are especially sensitive to defective parts or services. Although a larger company might weather a few defects, they can destroy a small company’s reputation and customer base. Small companies are also more sensitive to idle inventory and capital equipment, rework, absenteeism and machine breakdowns.
As an entrepreneur, your first step is to make sure your senior management team members understand that the company needs better performance and to gain their support. You can then begin your Six Sigma journey, basing its destinations on profit and growth objectives.
Identify a team of Six Sigma consultants to help with the process. Keep in mind that your strategic focus should not be on improving your bottom line and growth, but on enabling Six Sigma methodology to become your company’s route to “overachieving” your goals and exceeding customer expectations.
If deployed well, Six Sigma will become part of your company’s DNA. Improved profits and growth will follow.