I teach that by itself Lean is a way to redesign a value stream according to certain principles to improve flow in a value stream, thereby reducing cycle time and achieving a number of other benefits quickly. Six Sigma has two modes: project and operational. The project mode involves a framework such as DMAIC or DfSS. The operational mode employs Six Sigma principles (management by facts and data, statistical thinking, systematic identification of root causes of outcomes, etc.) to achieve stakeholder goals. Lean Six Sigma can be used to provide a framework for kaizen bursts, or to solve other problems preventing continuous flow in an organization or value stream.

Hmmm…Upon re-reading this it strikes me that it’s full of jargon. Let’s try putting it into layman’s terms.

Lean helps you make things with minimal waste and delay. Six Sigma helps you find out why things vary and how to reduce variation. Lean Six Sigma helps you solve challenging problems causing waste and delay.

Developing a great lifestyle from your business depends on your ability to create automatic systems to get work done without your day-to-day attention.  This program gives you a step-by-step process for creating effective business systems that allow you to automate your business.  In this podcast Business Profits Radio host Robert Skrob asks Tom about Six Sigma. What is it? How is it useful to small businesses? Can it be used to improve sales, marketing, operations? This wide-ranging interview covers a tremendous variety of topics relating to business process excellence.

A while ago I was asked by a colleague to recommend a Lean Six Sigma benchmark partner for a large aerospace firm that had been using Six Sigma for quite some time. Upon calling some of my favorite clients I learned that their Lean Six Sigma initiatives had been phased out. I was dismayed to hear of this and arranged to meet with one of the senior leaders to discuss why this had occurred in his organization. I learned that what had disappeared was not the Lean Six Sigma approach. Indeed, the senior leader said he knew of no other way to manage his operations. What had gone was the Lean Six Sigma bureaucracy. The personnel devoted to coaching senior leaders, providing Lean Six Sigma courses for training, etc. were gone.
It doesn’t take a lot of thought to understand why this would occur. Lean Six Sigma has been around in one form or another since 1986. That’s a pretty long run. It has evolved into a complete system for leading organizations to operational excellence. If an organization is still using Lean Six Sigma solely to execute projects, then it is missing the benefit to be had from applying the approach in its normal day-to-day operations.
If the organization has been using Lean Six Sigma for several years, it is also wasting a lot of talent by relying too much on Belts. The nature of Lean Six Sigma’s change agent infrastructure is such that the personnel involved in the program full time are routinely cycled back into the organization. These people are “damaged goods” in the sense that they can no longer function as traditional managers. Lean Six Sigma is based on principles such as root cause identification, value flow, defect prevention, etc.. Traditional management is based on command-and-control, not process; it focuses on results, not on causes. Traditional managers manage via feedback, Lean Six Sigma Leaders manage using feed-forward models.
In short, Lean Six Sigma is at its best after it has all but disappeared from the organization chart. It is still there, embedded in everything the organization is doing in its operations. It won’t go away because its practitioners realize that old-fashioned management is horribly flawed and a terrible way to run an organization. Traditional management is a disease; the Lean Six Sigma approach, done properly, is the cure.

1. It isn’t. Six Sigma is still going strong. Under new names. As part of the way things are normally done. Six Sigma has become fully integrated into the organization. Why call what you do all day by a special name?
2. Charlatans and hacks. I once saw an interesting question in a Six Sigma forum. I subscribed and followed the discussion for two or three weeks. The right answer was in there all right, in the middle of a very long list of irrelevance and flat out bad advice. I’ve listened to and read enough to know that there are plenty of pretenders out there. But it’s hard for the non-expert to sort the wheat from the chaff.
3. Baggage from previous failures. As leaders move from places where it was poorly done. When I mentioned Six Sigma to a new CEO he exclaimed “We used it at the last company I worked at. It was nothing but DPMOs for everything. Worthless!” Yeah, DPMOs everywhere is worthless alright. Too bad he had this experience, but it doomed the efforts at his new company.
4. Saturation of the base. Most manufacturing organizations of any size are already doing it. Other areas are more resistant. Six Sigma doesn’t always translate easily into industries like healthcare. It works alright, but it’s not obvious to the healthcare expert at first glance.
5. Cost cutting. In the economic downturn programs of this type are easiest to cut. The benefits are not always immediate, and in a downturn some managers insist on immediate payback.
6. Mobility of management. One of Deming’s deadly diseases. Owner- and Board-driven Process Excellence (PE) seems to last longer. If leaders come and go, Six Sigma won’t last long either.
7. Victory has been declared. Many businesses, especially in America and Europe, only did Six Sigma to deal with some crisis. Once the crisis is past, Six Sigma is abandoned.
8. Displaced by Lean. Lean can get you a fast, big improvement using simple tools. Why bother with the complexity of Lean Six Sigma or Six Sigma? The trouble is, Lean has its place and so does Six Sigma. It’s not a case of “or”, it’s a case of “and.”
9. Not the latest-and-greatest thing. Many organizations did Six Sigma because it was the big thing at the moment. Six Sigma has been around for a while. The glamor is no longer there compared to other fads. True, there’s nothing better around. But to the glamour seeker that’s no reason to stay the course.
10. Death by accounting. Six Sigma and Activity Based Costing or Resource Consumption Accounting don’t mix well. These are still the dominant accounting systems used by business. Until they go away, leaders who improve using Six Sigma will continue to suffer as the accounting systems mistakenly report poor performance. Until an item made for sale is valued differently than an item made for inventory, Six Sigma is doomed.

The only acceptable reason for not using Six Sigma to improve operations is one that I don’t think is true, at least not yet: A better way to achieve process excellence has been discovered. If there is a better approach to achieving operational excellence, I don’t know what it might be. If you have any ideas, please let me know. I’m all for copying a good thing when I see it!

In the 1980s it was much in fashion to compare America to Japan. One of the key differences between the two nation’s approaches was that Japanese were much more likely to embrace a strategy of gradual, continuous improvement. Americans more-or-less lurched forward. We would start out with a sizable lead in some area, then wait until it was clear that we’d fallen behind. At that point we would rally the troops and quickly implement a set of innovations that would once again put us in the lead. Then the cycle would repeat itself.

An example of this was Sputnik. The USSR surprised the world, including the USA, by being the first nation to put a satellite in orbit. I was only 9 at the time but I distinctly remember people in the neighborhood looking skyward with telescopes and binoculars to catch a nighttime glimpse of the small, man made orb passing overhead. It captured mankind’s imagination. And it demonstrated clearly that America had fallen behind.

The American response was to dramatically increase spending in science and mathematics education, defense, and space research. President John F. Kennedy declared a national goal of landing a man on the moon and returning him safely to earth. The improvement project was on. And, of course, it worked. To be sure, the space program as well as education in math and science continued, but improvement never again reached the rates of the 1960s.

In 1986, Masaaki Imai established the Kaizen Institute to help Western companies introduce kaizen concepts, systems and tools. That same year, he published his book on Japanese management, Kaizen: The Key to Japan’s Competitive Success. This best-selling book has since been translated into 14 languages. Kaizen means ongoing improvement involving everybody, without spending much money. It occupies a space between innovation and maintaining the status-quo (see Figure 1.) In an interview 11 years later Imai said “Many companies still have not fully embraced the kaizen concept.”

Kaizen

Figure 1-Kaizen

Kaizen is widely used in Japanese firms. Toyota is known to use the approach to engage its entire workforce in the ongoing quest for improvement. Most of the improvements wrought by Kaizen are small, but they add up. American firms pay lip service to improvement, but they failed to embrace Kaizen for well over a decade. This lack of interest in Kaizen in America could well have been due to America’s lack of interest in improvement that was “ongoing,” we want things fast! Enter the “Kaizen Blitz.”

Kaizen Event

The Kaizen Blitz, more commonly known as a Kaizen Event, is usually a five day affair that addresses a particular issue. The Lean Six Sigma Kaizen event usually follows the Define-Measure-Analyze-Improve-Control (DMAIC) format. The issues that are addressed are usually those identified during an initial Lean deployment to a value stream. The Lean team creates a value stream that is as lean as possible for the moment, then identifies obstacles to moving closer to one piece flow. These obstacles, such as long changeover times, quality defects, equipment limitations, etc. are targets for Kaizen Events. The Kaizen Event combines several well-known improvement approaches into one:

• Workout. GE’s workout was designed to identify quick ways to streamline a process. The Kaizen event follows what amounts to a Lean “workout” in the sense that obvious improvements in flow have already been made. However, a first step in a Kaizen event is to list other obvious ways to improve the process. These improvement activities are made immediately or assigned to an individual or group.
• Just-do projects. These are improvements where it is obvious what needs to change, but it takes time and resources to make the changes.
• Six Sigma projects. These are improvements where the desired goals are known, but the means of accomplishing these goals are unclear. The Six Sigma skill set of a Black Belt or Green Belt is needed to link the goal (Y) to the root causes that will accomplish it (Xs) via a transfer function (Y=f(x).)

What’s missing here is the original idea of Kaizen: gradual, continuous improvement. Still, I’m all for improvement any way I can get it. And in America the Kaizen event has caught on in a big way.

Software helps select the best projects.

In a previous column I discussed how Six Sigma projects should be selected using the theory of constraints (TOC). After attempting to do so, most discover yet another constraint: money. In most organizations there are more opportunities for improvement than one can afford to pursue. If it isn’t money, some other resource will be in short supply, such as talent. And as if that weren’t bad enough, the task is further complicated by uncertainty of the payoff from the projects and their probability of success. An exciting computer software product known as Crystal Ball Pro by Decisioneering makes it possible to select winning projects by factoring in all of the relevant factors. It does so by simulating various scenarios thousands of times, then choosing those that perform best. For example, the research and development group of a major public utility has identified eight possible Six Sigma projects. A net present value analysis has computed: The expected revenue for each project, if it’s successful Its estimated probability of success Its required initial investment Using these figures, the finance manager has computed the expected return and the expected profit for each project. Unfortunately, the available budget is only $2 million, and selecting all projects would require a total initial investment of $2.8 million. Thus, the objective is to determine which projects will maximize the total expected profit while staying within the budget limitation. Complicating this decision is the fact that both the expected revenue and success rates are highly uncertain. Figure 1 shows a spreadsheet model for this problem. Figure 1: Project Selection Spreadsheet The decision variables in column H are binary; that is, they can only assume the values zero (do not fund the project) and one (fund the project.) The assumption variables are in the “Expected Revenue” and “Success Rate” columns. Crystal Ball Pro will use simulation to evaluate a range of values for these two columns. The total profit, shown in cell G19, is a forecast variable whose values depend on the assumption and decision variables. The idea is to find the combination of projects (determined by the decision variables) that maximize total profit, taking into account the variation in expected revenue and the probability of success. The project selection spreadsheet isn’t quite good enough given that the number of possible sets of projects is too large to identify by trial-and-error. Crystal Ball Pro can help here too. It includes a program, called OptQuest, which will perform a search to find the optimal package of projects (see Figure 2). Figure 2: Progress Toward a Solution The best solution OptQuest found (in a search that I limited to 10 minutes) is to fund all projects except 3 and 5 (see Figure 3). The expected net profit is $1.54 million. Note that the distribution of total profit includes a number of scenarios that would result in a net loss. This occurs because OptQuest was asked to find the solution that maximized expected (average) total profit, but it can limit searches to profitable software solutions too. Figure 3: Results

Which process improvement approach is right for you and your needs?

People sometimes ask me to explain the difference between lean production and six sigma. The question is usually phrased something like, “Should I use six sigma or lean production methods to improve my operations?” Before I tell you my answer, let me provide a brief background on these different approaches to process improvement.

Lean production is based on the Toyota Production System and usually includes the elements shown in Figure 1. When properly implemented, a lean production system can dramatically improve productivity (by as much as 95 percent when compared with traditional batch-and-queue production systems).

Lean production dates back to the post-World War II era in Japan. It was developed by Taiichi Ohno, a Toyota production executive, in response to a number of problems that plagued Japanese industry. The main problem was that of high-variety production, required to serve the domestic Japanese market. Mass-production techniques, which were developed by Henry Ford to economically produce long runs of identical products, were ill-suited to Toyota’s situation. The lean approach (the term “lean” was coined in the early 1990s by MIT researchers) systematically minimizes waste–called muda–in the value stream. Muda includes all types of defective work, not just defective products. Wasted time, motion and materials are also muda.

OK, so how does this relate to six sigma? To make a valid comparison, we need a new definition of quality itself. By defining quality in terms of value rather than in terms of defects, we can see that six sigma quality involves a search for ways to reduce muda . I propose the following definition for six sigma:

• A general approach to reducing muda in any environment

• A collection of simple and sophisticated methods for analyzing complex cause-and-effect relationships

• A means of discovering opportunities for improvement

The lean approach offers a set of solutions to muda in a high-variety production environment. Six sigma applies to the problems addressed by lean but also seeks to solve other problems common to production. However, because both six sigma and lean address the problem of muda, there is a great deal of overlap. The approaches should be viewed as complements to one another. Some examples of this synergism are shown in Table 1.

Table 1: The Synergy of Six Sigma and Lean Production

If you’re facing a situation where lean solutions can be used (e.g., high-variety production), you shouldn’t hesitate to implement lean: It offers proven solutions to known problems. Six sigma methods will help you with lean, and they will help you continue to improve when it’s time to move into administrative and other nonproduction areas.

Lean Six Sigma

A quick review of the above should make it clear that there is a natural affinity between Lean and Six Sigma. This has been incorporated into a single approach to business improvement: lean six sigma. Lean Six Sigma takes parts of Lean and parts of Six Sigma and puts them together in a single, integrated approach to achieving process excellence. Organizations can move from Lean or Six Sigma to Lean Six Sigma, or they can simply introduce Lean Six Sigma from the outset. If an organization is just starting the journey to excellence, I recommend the following:

1. Begin with Lean. Identify value streams for the most important product families and move these as closely as practical to one piece flow based on pull systems.
2. Examine the improved value streams to determine where obstacles exist to moving closer to one piece flow. These obstacles will generally be caused by excessive setup or changeover times, information flow issues, excessive variation, and other forms of muda.
   • Decide how best to deal with each obstacle on an issue-by-issue basis. Some can be remedied by “just do” projects, others by Kaizen events, others by routine continuous improvement activities, and still others by applying Lean Six Sigma

Of course, for most organizations conducting these improvement activities will require a complete transformation in the culture of the organization. But that’s the topic for another post!

Who are they and what do they do?

I‘m often asked about the term “black belt” as it relates to six sigma. What, precisely, is a black belt? Where did the term originate? For that matter, where did the term “six sigma” originate? And, while we’re on the subject, what’s a green belt or master black belt?

Let’s start with the term “six sigma.” In a conversation with Ed Bales of Motorola University, I learned that Motorola coined the term in 1986. As those who have worked in quality for a while know, this term has statistical roots in the technique known as process capability analysis. Prior to the Japanese industrial invasion of U.S. markets, quality practitioners were happy with three sigma quality, which translates to about three errors or defects per 1,000 items for processes in a state of statistical control. Motorola discovered that its processes weren’t in statistical control–estimates based on field failure data indicated that Motorola’s processes apparently drifted by an average of 1.5 standard deviations. In a conversation with ex-Motorola trainer Mikel Harry, I learned that he considers the Cpk index–which measures short-term process variability under statistical control–worthless. Harry prefers the Ppk index, which measures actual performance rather than process capability. (Note that many experts, including me, disagree strongly with Harry on this issue.) In any case, before computing expected process failures, Motorola adds this 1.5 standard deviation. Thus, when we hear that a six sigma process will produce 3.4 parts-per-million (PPM) failures, we find that this PPM corresponds to the area in the tail beyond 4.5 standard deviations above the mean for a normal distribution.

Motorola also adopted the terms “black belt” and “green belt.” For my book The Six Sigma Handbook, I did extensive research into what employers expect of people with these titles. Here is a summary of these various responsibilities:

• Master black belt–This is the highest level of technical and organizational proficiency. Because master black belts train black belts, they must know everything the black belts know, as well as understand the mathematical theory on which the statistical methods are based. Masters must be able to assist black belts in applying the methods correctly in unusual situations. Whenever possible, statistical training should be conducted only by master black belts. If it’s necessary for black belts and green belts to provide training, they should only do so under the guidance of master black belts. Because of the nature of the master’s duties, communications and teaching skills should be judged as important as technical competence in selecting candidates.

• Black belt–Candidates for technical leader (black belt) status are technically oriented individuals held in high regard by their peers. They should be actively involved in the organizational change and development process. Candidates may come from a wide range of disciplines and need not be formally trained statisticians or engineers. However, because they are expected to master a wide variety of technical tools in a relatively short period of time, technical leader candidates will probably possess a background in college-level mathematics, the basic tool of quantitative analysis. College-level course work in statistical methods should be a prerequisite.

Six sigma technical leaders work to extract actionable knowledge from an organization’s information warehouse. Successful candidates should understand one or more operating systems, spreadsheets, database managers, presentation programs and word processors. As part of their training they will be required to become proficient in the use of one or more advanced statistical analysis software packages.

• Green belt –Green belts are six sigma team leaders capable of forming and facilitating six sigma teams and managing six sigma projects from concept to completion. Typically, green-belt training consists of five days of classroom training and is conducted in conjunction with six sigma team projects. Training covers facilitation techniques and meeting management, project management, quality management tools, quality control tools, problem solving, and exploratory data analysis. Usually, six sigma black belts help green belts choose their projects prior to the training, attend training with their green belts and assist them with their projects after the training.

Although the martial arts terms described above are common, they are by no means universal. Companies and consulting firms often create their own titles to describe the work done by these technical leaders.

Marketing is a process. Six Sigma is an approach for achieving process excellence. It will help you improve the marketing process by providing tools & techniques for identifying what the marketing process is, including suppliers, inputs, process steps, outputs, and customers. Six Sigma helps you understand the need to determine who owns the process and helps the process owner determine how to improve it. It provides a framework for improving all aspects of this process. It does much more as well. I recommend you enroll and take a week to look around the training site. If it looks like a good value to you, stay in the course and become a Certified Six Sigma Black Belt or Green Belt.

The converse is also true, marketing can help Six Sigma. Both marketing and Six Sigma focus on customers. Marketing is a management discipline dedicated to understanding customer demands, how to design products meet them, and how to let potential customers know what’s available. In Six Sigma training for Black Belts and Green Belts we teach a number of tools that are borrowed directly from marketing, such as the analytic hierarchical process, quality function deployment and Pugh matrices. Master Blacks use conjoint analysis, a quasi-designed experiment approach to measuring customer importance weights. Design for Six Sigma is all about integrating the design process across marketing, engineering, and production to better meet implicit and explicit customer demands.

Beyond the technical tools, when Six Sigma or Lean Six Sigma is well done it begins with understanding what customers are solving for, then helping them achieve their goals by improving the processes you use to provide them with service. This is truly an integration of marketing and Six Sigma.

Six sigma isn’t just about quality for quality’s sake.

Your employer, Peerless Systems, acquired Acme International for its technology. But your leaders want more than just Acme’s technology; they also want Acme to be successful in its own right. But Acme has problems. Acme, it seems, is still operated as a traditional three-sigma company. Peerless has long since moved to six sigma and beyond, and you played an important role in making that happen. Your new challenge is to lead Acme from three sigma to six sigma. It’s what you’ve been waiting for your entire career–welcome to senior leadership!

You bring your staff together to establish a baseline. Bob, the vice-president of marketing, says, “We’re losing customers due to poor quality, and our competitors are killing us on price.”

Ann, your director of quality, is next. “When Bob told us about the quality problems, we increased inspection and testing, ” she says. “Field failures dropped, but (of course) costs increased.”

Figure 1: Cost and Value of Quality

Lorraine, vice-president of finance, shows Figure 1. “My staff and I believe that the customer places a certain value on quality,” she states. “At first, our quality was too low, and the customer wouldn’t buy our products. When we improved our quality, we also increased our costs, but the customer wouldn’t pay the higher prices we had to charge. We’ve found that profitability is maximized when total cost of poor quality is about 25 percent of sales. The problem is that there is very little profit, even at that cost level.”

This all has a familiar ring to you. You know that the typical three-sigma company spends about 25 percent of each sales dollar on the cost of poor quality. Before starting the six sigma journey, Peerless was in similar shape. You’ve prepared the slide shown in Figure 2 to illustrate the difference between three-sigma and six-sigma quality for your staff.

Figure 2: Three Sigma Profits vs. Six Sigma Profits

“Right now, our business is only capable of operating at a level equivalent to about three-sigma quality,” you explain. “Trying to get better quality out of our existing systems only adds costs. We must develop new systems that deliver better quality and lower costs simultaneously. We need six sigma systems.”

You go on to describe the differences between six sigma systems and three sigma systems, and the importance of six sigma to Acme. You tell them that six sigma is not a destination, but a journey of continuous improvement. Of course, Acme won’t go from three sigma to six sigma in one big jump. Instead, overall performance will move from three sigma to four sigma, then to five sigma and so on as people are trained and systems redesigned and improved. Figure 3 illustrates the expected progress toward six sigma.

You summarize by telling your staff that six sigma is not about quality for the sake of quality; it is about providing better value to customers, investors and employees. Paraphrasing the Chinese philosopher Lao-tzu, you announce, “Six sigma is a journey of a thousand miles. Creating a roadmap that links customer satisfaction, quality and costs is the first step.”