six sigma - for system innovation & dessign

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Six Sigma Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho IX CUSTOMER & COMPETITIVE INTELLIGENCE FOR SYSTEMS INNOVATION & DESIGN S IGMA S DEPARTMENT OF STATISTICS DR. RICK EDGEMAN, PROFESSOR & CHAIR SIX SIGMA BLACK BELT [email protected] OFFICE: +1-208-885-4410

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Page 1: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

IXCUSTOMER & COMPETITIVE INTELLIGENCE

FOR SYSTEMS INNOVATION & DESIGN

S IGMAS DEPARTMENT OF STATISTICS

DR. RICK EDGEMAN, PROFESSOR & CHAIR – SIX SIGMA BLACK BELT

[email protected] OFFICE: +1-208-885-4410

Page 2: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

IXS IGMAS DEPARTMENT OF STATISTICS

Introduction to Six Sigma

Page 3: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

“Often, problems are knots with many strands, and looking at

those strands can make a problem seem different.”

Mr. Rogers

Page 4: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

a highly structured strategy for acquiring, assessing, and applying customer, competitor, and enterprise intelligence for the purposes

of product, system or enterprise innovation and design.

Innovation AlgorithmDMAIC (Define-Measure-Analyze-Improve-Control)

Design for Six Sigma AlgorithmDMADV (Define-Measure-Analyze-Design-Verify)

Makes Integrative Use Of:Various strategies and tools from Statistics, Quality, Business,

Engineering and … ???

is …

Page 5: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Six Sigma Organizations

• GE … All 300,000+ GE employees must be Six Sigma certified. All new GE products developed using the “Design for Six Sigma” (DFSS) approach.

• 3M … New CEO (from GE) requires all 3M employees to become Six Sigma certified.

• Dupont• AlliedSignal• Sun Microsystems• Raytheon• Motorola• Boeing• Lockheed-Martin• Bank-of-America• American Express• HSBC• SAS Institute

Rapidly Increasing Areas of Application.

– Healthcare – GE Heathcare - SLC– Financial,– Military – NSWC, Pentagon, etc.

• Fueled by:• Strategic Contexts.• Notorious bottom-line orientation & results. • Adaptable to multiple bottom lines.• Process orientation: rigorous and systematic

approaches to innovation and design.• Focus on the customer.• Successful track record elsewhere.• “Industry Buzz”.

While Six Sigma is new at, for example, 3M – its benefits at others ofthese organizations is measured in the multi-billions of US dollars.

Page 6: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Quality is a state in which value entitlement is realized for the customer and provider in every aspect of the business relationship.

Business Quality is highest when the costs are at the absolute lowest for both the producer & consumer.

Six Sigma provides maximum value to companies in the forms of increased profits and maximum value to consumers with high-quality products and services at the lowest possible cost.

Page 7: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

TheVillain

Cost of Poorly Performing Processes σ level DPMO CP3

2 308,537 Not Applicable3 66,807 25%-40% of sales4 6,210 15%-25% of sales5 233 5%-15% of sales6 3.4 < 1% of sales

Each sigma shift provides a 10% net income improvement

Cost of Poorly Performing Processes (CP3)

Sigma (σ) is a measure of “perfection” relating to process performance capability … the “bigger the better.” A processoperating at a “Six Sigma” level produces only 3.4 defects per million opportunities (DPMO) for a defect. Without dedication of significant and appropriate attention to a process, most processes in leading companies operate at a level between 3 and 4 sigma.

Why is Six Sigma Important?

Page 8: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Cost of Poorly Performing Processes The cost to deliver a quality product can account for as much as

40% of the sales price.

For example, a laser jet printer purchased for $1,000 may have cost the manufacturer $400 in rework just to make sure that you took home an average-quality product.

For a company whose annual revenues are $100 million and whose operating income is $10 million, the cost of quality is roughly 25% of the operating revenue, or $25 million.

If this same company could reduce its cost of achieving quality by 20%, it would increase its operating revenue by $5 million – or 50% of the current operating income.

Page 9: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

… and the Hero • 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.

• Typical Results: companies that properly implement Six Sigma have seen profit margins grow 20% year after year for each sigma shift (up to about 4.8s to 5.0s. Since most companies start at about 3s, virtually each employee trained in Six Sigma will return on average $230,000 per project to the bottom line until the company reaches 4.7s. After that, the cost savings are not as dramatic.

• However, improved profit margins allow companies to create products & services with added features and functions that result in greater market share.

What Does Six Sigma Tell Us?

Page 10: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Six Sigma Affects Six Areas Fundamental to Improving a Company’s Value:

1. Process Improvement2. Product & Service Improvement3. Investor Relations4. Design Methodology5. Supplier Improvement6. Training & Recruitment

Page 11: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Six Sigma vs. TQM TQM Terminology Six Sigma Improvement

Terminology

•Identify the Project•Establish the Cause

•Define

•Diagnose the Cause •Measure•Analyze

•Remedy the Cause •Improve

•Hold the Gains •Control

•Replicate Results•Nominate New Projects

•Replicate

Page 12: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Values of Six Sigma OrganizationsIssue Classical Focus Six Sigma Focus

Analytical Perspective point estimate variabilityManagement cost & time quality & timeManufacturability trial & error robust designVariable Search one-factor-at-a-time design of experimentsProcess Adjustment tweaking process control chartsProblems fixing preventionProblem solving expert based system basedAnalysis experience dataFocus product processBehavior reactive proactiveSuppliers cost relative capabilityReasoning experience based statistically basedOutlook short-term long-termDecision Making intuition probabilityApproach symptomatic problematicDesign performance producibility

Page 13: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Values of Six Sigma Organizations

Issue Classical Focus Six Sigma Focus

Aim company customerOrganization authority learningTraining luxury necessityChain-of-command hierarchy empowered teamsDirection seat-of-the-pants benchmarking/ metricsGoal setting realistic perception reach out & stretchPeople cost assetControl centralized localizedImprovement automation optimization

Page 14: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

The SIPOC Model

Suppliers Customers

Inputs OutputsProcess

Steps

Inform Loop

Page 15: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Six Sigma COPIS Model

Customers Suppliers

Outputs InputsProcess

Steps

The Voice of the Customer (VOC) is aggressively sought and rigorously evaluated and used to determine needed outputs and hence the optimal process configuration needed to yield those outputs and their necessary

inputs for which the best suppliers are identified and allied with.

From Concept to Market: the Voice of the Customer

How does Six Sigma Work?

Page 16: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

The DMAIC Model

Define Control

Measure ImproveAnalyze

Voice of the Customer

Institutionalization

Page 17: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Kano Customer Need Model

Dissatisfiers Those needs that are EXPECTED in a product or service. These are generally not stated by customers but are assumed as given. If they are not present, the customer is dissatisfied.

Satisfiers Needs that customers SAY THEY WANT. Fulfilling these needs creates satisfaction.

Exciters /

Delighters

New or Innovative features that customers do not expect. The presence of such unexpected features leads to high perceptions of quality.

Page 18: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Kano Customer Need ModelDelighted

Disgusted

AbsentFullyImplemented

Stakeholder Satisfaction

TIME

Degree ofExecution

Page 19: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Dimensions of Quality- Garvin’s Eight• Quality is usually a bundle of characteristics • We need to disaggregate this composite notion• This decomposition will help us to

– make our notion of quality more precise– make comparisons possible– facilitate measurement

• Only the customer determines the relative importance of these dimensions

Page 20: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Garvin’s Eight Dimensions• Performance • Features• Conformance• Aesthetics

• Reliability• Durability• Serviceability• Perceived Quality

Page 21: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

What the Terms Mean (1)• PERFORMANCE

– Primary operating characteristics of a product

• FEATURES – bells & whistles– secondary characteristics that supplement the basic functioning

• CONFORMANCE– degree to which product meets pre-established standards

(meeting specs)

Page 22: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

What the Terms Mean (2)• RELIABILITY

– Probability of product remaining functional over a specified period of time

• DURABILITY – amount of use one gets out of a product before it

physically deteriorates

• SERVICEABILITY– speed and ease of repairs (or resolution of problems)

Page 23: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

What the Terms Mean (3)• ASTHETICS

– look, feel, and sound of a product – reflects individual preferences

• PERCEIVED QUALITY – perceptions of quality based on other cues and indirect

measures– reputation or affiliation often key

Page 24: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Competing on Quality• It is not often feasible to pursue all 8 dimensions • Trade-offs are necessary• Quality niches can be defined and defended• A firm can define what quality means for its

product• Must focus on the right quality measure: those

one(s) that matter to the consumer

Page 25: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Dimensions of Service Quality

• RELIABILITY: consistency, error-free dependability

• RESPONSIVENESS: willingness to help the customer

• TANGIBLES: environment for the service presented

• COMPETENCE: the right skills and knowledge required

Page 26: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Service Quality (cont.)• COURTESY: supplier’s behavior

• SECURITY: freedom from danger or risk

• ACCESS: ease of making contact

• COMMUNICATION: understandable to the customer

• EMPATHY: adopting the customer’s viewpoint

Page 27: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Aggregation• Often need to reduce the number of

dimensions. Reduced list is:– Reliability– Responsiveness– Empathy– Tangibles– Assurance

Page 28: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Six Sigma Road Map: R DMAIC SIBreakthrough

Stage Strategy Phase Objective

Identification Recognize Identify Key Business

Define Issues

Characterization Measure Understand Current

Analyze Performance Levels

Optimization Improve Achieve Breakthrough

Control Improvement

Institutionalization Standardize Transform How Day-to

Integrate Day Business is Conducted

Bre

akth

rou

gh S

trat

egy

Bla

ck B

elt

Pro

ject

s

Page 29: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Define

Control

Improve Analyze

Measure

Six Sigma Innovation & the DMAIC Algorithm

Define the problem and customerrequirements.

Measure defect rates and documentthe process in its current incarnation.

Analyze process data and determinethe capability of the process.

Improve the process and removedefect causes.

Control process performance andensure that defects do not recur.

“Common sense” doesn’t mean “commonly done” or when done, done well.

Six Sigma: How Do We Innovate?

Page 30: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Six Sigma from the GE PerspectiveSix Sigma is a highly disciplined process that helps a company focus on developing

and delivering near-perfect products and services. Why “sigma”? The word is astatistical term that measures how far a given process deviates from perfection.

The central idea behind Six Sigma is that if you can measure how many“defects” you have in a process, you can systematically determine how to

eliminate those and approach “zero defects”.

Six Sigma has changed the DNA at GE – it is the way that GE works – inEverything that GE does and in every product GE designs.

“What is Six Sigma? The Roadmap to Customer Improvement”www.ge.com/sixsigma/makingcustomers.html

Page 31: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Design for Six Sigma Applications of Six Sigma that focus on the design or significant

redesign of products and services and their enabling processes so thatfrom the beginning customer needs and expectations are fulfilled

are known as Design for Six Sigma or DFSS.

The focal aim of DFSS is to create designs that are resource efficient,capable of exceptionally high yields, and are robust to process

variations. This aim leads to the DFSS algorithm

Define-Measure-Analyze-Design-Verify (DMADV).

Page 32: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Define

Verify

Design Analyze

Measure

Design for Six Sigma (DFSS)

All new products at GE are designed using a DFSS algorithm.

Define customer requirements andgoals for the process, product or service.

Measure and match performance to customer requirements.

Analyze and assess the design for the process, product or service.

Design and implement the array of new processes required for the new process, product or service.

Verify results and maintain performance.

Six Sigma: How Do We Design?

Page 33: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Design for Six Sigma at GE:

DFSS is changing GE. With it GE can build on all of its capabilities and takeall of its product and process designs to a new level of world-class

performance and quality.

The essence of DFSS is predicting design quality up front and driving qualitymeasurement and predictability improvement during the early design phases-

a much more effective and less expensive way to get to Six Sigma qualitythan trying to fix problems further down the road.

What We Do. GE Corporate Research and DevelopmentFormerly posted at: www.crd.ge.com/whatwedo/sixsigma.html

Page 34: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Another View of Design for Six Sigma:DFSS is the change in the product design organization from a deterministic to a

probabilistic culture. Our people were trained to incorporate statistical analysis offailure modes, both in products and processes. They began to incorporate design

changes that modify & eliminate design features with a probability of failure within apredefined range of operating environments and conditions. The design organizationchanged from a “factor-of-safety” mentality to one in which there was a quantitative

assessment of design risk. Four elements of design are most critical to the effort:

•Design for producibility (design for manufacturing and assembly);•Design for Reliability;

•Design for Performance (technical requirements); and•Design for Maintainability.

“Design for Six Sigma: 15 Lessons Learned”, Quality Progress, Vol. 35, No. 1, pp. 33-42, January 2002.

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Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Improvement & Innovation – Focuses on high priority problems in

business processes. This uses the DMAIC methodology: Define, Measure, Analyze, Improve, and Control.

Design–Design For Six Sigma (DFSS) addresses new or

fundamentally poor processes. The methodology is called the DMADV or DMADOV model: Define, Measure, Analyze, Design, Optimize, and Verify.

Business Process Management –aids in definition and management of operations and activities in terms of core and enabling processes. The resulting process management systems provide a foundation of process definition and baseline data for all process design and improvement activities.

Page 36: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Six Sigma Strategy & Methods

Appendix 1: Corporate Leadership

Page 37: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Six Sigma and General Electric General Electric CEO, Jack Welch, 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 10% 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 was averaging about 3.5σ when it introduced the program.

With Six Sigma embedding itself deeper into GE’s processes, they achieved the previously “impossible” operating margin of 16.7% in 1998 – up from 13.6% in 1995.

In dollar amounts, Six Sigma delivered more than $300 million to GE’s 1997 operating income and more than $600 million in 1998.

Page 38: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Six Sigma and Raytheon Former AlliedSignal executive Daniel P. Burnham, who

became Raytheon’s CEO in 1998, has made Six Sigma a cornerstone of the company’s strategic plan.

By pursuing Six Sigma quality levels throughout the company, Burnham expects Raytheon to improve its cost of doing business by more than $1 billion annually by 2001.

Page 39: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Six Sigma and the Service Sector Robert Galvin: Former Motorola CEO

Failing to implement Six Sigma in commercial areas with the same force that the company implemented it in its industrial sectors cost Motorola $5 billion over a four-year period.

Page 40: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

How Big is the Service Sector? 79% of the U.S. Workforce is employed by commercial businesses.

90% of those employed in manufacturing are actually doing service work – such as finance, marketing, sales, distribution and purchasing.

So: 79% + (.9)*(21%) = 98% of the U.S. Workforce is involved in “service work”.

MISTAKEN BELIEFS: Some companies still believe that improving commercial processes is less important than

improving industrial processes or that seemingly intangible commercial processes can’t be controlled.

BOTH ARE WRONG: Customers are more likely to take their business elsewhere because of poor service than

poor products.

Companies like GE have shown that improving internal and external commercial processes adds to the bottom line and to customer satisfaction significantly

Page 41: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

AlliedSignal 70,000 Employees

Chemicals, Fibers, Plastics, Aerospace Products, Automotive Products.

Larry Bossidy came from GE to become CEO in 1991

Market Value = $4 billion in 1991

Market Value = $29 billion by the end of 1998

Market Value = $38 billion by 2000.

Page 42: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

AlliedSignal• TODAY’S GOALS:• 6% productivity increase• Reduced Inventory• Full-Capacity Utilization• Little or no Overtime• Reliable Products• 5s Manufacturing• 5s Designs• Predictable Cash Flow• 5s Suppliers

• BY END OF 1998:• Total Impact of Six Sigma

Within AlliedSignal Reached $2 Billion.

• Six Sigma Profits in Service Areas including:– Order Processing– Shipping– Procurement– Product Innovation

Page 43: Six Sigma - For System Innovation & Dessign

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

We can’t tell other organizations how to do Six Sigma, but we can tell them how not to do it. Allied has made mistakes along the way and, in the process, learned some tremendous lessons.

Lesson 1: The Organization’s Leadership Must Own Six Sigma

Upper management supported Six Sigma, managers below those at the top saw it as a “flavor of the month”.

Black Belts seen as a nuisance.

Black Belts were using “Six Sigma jargon” while managers were using business vocabulary. This led to confusion.

SOLUTION: Introduce ALL levels of management to Six Sigma. Management had weeklong training sessions to understand the methods of the

Breakthrough Strategy and how Black Belt training and experience could be leveraged. ALSO … how various initiatives “fit together”.

BEGAN TO FOCUS ON PROCESSES – NOT PEOPLE as the source of problems. Also, understanding of the Breakthrough Strategy provided a “plan of action”, rather than just a “command” to make something happen.

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Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Six Sigma Changed the Company Culture and

One of the flaws at Allied is that we had too much vertical mobility. Managers inch up the same smokestack, learning more and more about less and less. But companies that train promising individuals as Black Belts circumvent the vertical flow and move people around horizontally, having them serve time in as many major businesses or divisions as possible to give them a kaleidoscopic view of the organization and the benefit of being mentored by a variety of new blood.

Linked AlliedSignal’s Goals, Vision & Activities.

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Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Lesson Two: A Beginning Without an End Having recognized the need to train managers in the Six Sigma Breakthrough Strategy, Allied

dedicated the next year to training 1,000 leaders in the organization in how Six Sigma worked, and in its potential financial impact.

Training sessions lasted 3.5 days and emphasized Six Sigma’s impact on: Profitability through improved processes; The Crucial role of Black Belts, RATHER THAN teaching statistical processes involved

in achieving Six Sigma.

Initially trained top managers at each of Allied’s 11 Strategic Business Units and gradually worked their way down the organization to middle management, line supervisors, and so on.

COMPLAINTS FROM BLACK BELTS WITHIN SIX MONTHS: Management turnover and too much promotion of Black Belts into management before benefit from the training and skills could be realized. SO … training had to be ongoing.

Allied is not in the business of measuring activity. We are in the business of measuring results.IF something doesn’t have a positive impact on customer satisfaction, our shareholders, and employees,

and in the process makes a lots of money, THEN we just flat out aren’t going to do it.” RICHARD A. JOHNSON, Director of Six Sigma at AlliedSignal

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Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Lesson Three: Black Belt Retention AlliedSignal’s goal: send Black Belts with a minimum of 18-24 months

experience mastering the Breakthrough Strategy back into the organization to create Six Sigma behavior & thinking.

40% of Black Belts were promoted to departmental or plant managers. Others left AlliedSignal for higher-paying jobs at suppliers. Others completed only one or two projects before they were pulled back into their previous assignments with leadership not properly reviewing projects and properly acting upon financial opportunities created by Black Belts so that managers felt that Six Sigma wasn’t particularly important.

50% of Black Belts were absorbed back into the organization within six months. NOW … BLACK BELTS must work at least 18-24 months on a series of Six Sigma

projects prior to a change of roles. TIME & EXPERIENCE ARE VIEWED AS CRITICAL TO SIX SIGMA SUCCESS AND THE MATURITY OF THE BLACK BELT.

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Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Lesson Three - Continued AlliedSignal’s Champions & Master Black Belts

3.5 Day Executive Overview followed by the traditional Four-Month Black Belt training process.

MASTER BLACK BELTS are selected from the best of the Black Belts.

Each of these trains and mentors 10 Black Belts

Each Black Belt trains and mentors 10 Green Belts.

NOW: All Salaried Employees are Expected to Undergo the 26 Hours of Training Required for Green Belt Certification by 2000.

CHAMPIONS 20

Master Black Belts 70

Black Belts 2000+

Green Belts 18,000

Total # of Employees 70,000

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Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Lesson Four: Supplier Capability is Critical to the Success of the Breakthrough Strategy

The Majority of AlliedSignal’s Suppliers were operating at about three sigma.

This prevented the company from realizing the full benefits of Six Sigma.

AlliedSignal recognized that they needed to view suppliers as their partners.

AlliedSignal began TRAINING its suppliers and offering other technical assistance. To achieve Six Sigma it is important to minimize the number of suppliers, limiting

these to those that have been trained in the Breakthrough Strategy. Not only does AlliedSignal provide training, BUT then follows up by dedicating ITS

OWN BLACK BELTS to mentor and work with critical suppliers. AlliedSignal estimates that for every 300 Black Belts it trains, 100 are either customers or suppliers.

W. Edwards Deming:End the Practice of Awarding Business on Price Tag Alone.

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Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Lesson Five:There is No Such Thing as Operator Error

It is PROCESSES – not PEOPLE that Fail.

This maps to one of Deming’s 14 Points for Management: “DRIVE OUT FEAR”.

Focus on Processes implies that people are not accused, but rather, that they are able to investigate processes and be “part of the solution.”

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Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Lesson Six:Focus on Bottom-Line Improvement

The number one source of failure in deploying Six Sigma is the result of Lack of Commitment FROM THE Organization’s Leadership.

The Finance Department must be involved so that the impact of Six Sigma Projects on the Bottom-Line is apparent.

Black Belts, the Finance Department, and Executive Leadership must work in tandem.

While Black Belts create opportunities for cost reduction and increased profitability, the company’s Leadership must make sure that Black Belts focus on the right projects and take action on the savings opportunities they generate. Finance provides closure to the effort by ensuring that the savings are returned to the organization’s bottom line.

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Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Lesson Seven: Initiative Overload LARRY BOSSIDY, CEO: One of the things I have trouble with is … non-financial

objectives. Often they’re just as obscure and vacuous as they sound.

• FIVE ACTIONS TO PERPETUATE SIX SIGMA:

• TRAINING: Allied’s employee base changes enough every nine to ten months that maintenance of Six Sigma culture requires that new employees be trained in the Breakthrough Strategy.

• Senior management involvement.

• Continued on-site leadership training, and alignment of goals among divisions to reinforce Breakthrough Strategy thinking and goals.

• Requiring Black Belts to dedicate a minimum of two years to working on Six Sigma projects.

• Supplier involvement and improvement in Six Sigma initiatives.

Products and services should be improved ONLY to the degree that customer value is increased. Six Sigma is a program designed to generate money for the company, either through savings resulting from reduced costs, or from boosting sales by increasing customer satisfaction.

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Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

AlliedSignal:Hindrances to Six Sigma Success

Working on too many improvements at the same time.

Not having someone accountable for the problem.

Not being a process-based company.

A lack of trained and experienced people.

Middle managers who fear uncertainty about future roles.

Lack of metrics focused on customer value-added processes.

Lack of integrated information and financial systems.

Fragmented, staff-driven approaches.

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Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Six Sigma Strategy & Methods

Appendix 2: People of Six Sigma

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Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Six Sigma Champions Create the vision of Six Sigma for the company.

Define the path to implement Six Sigma across the organization.

Develop a comprehensive training plan for implementing the Breakthrough Strategy.

Carefully select high-impact projects.

Support development of “statistical thinking”.

Ask Black Belts many questions to ensure that they are properly focused.

Realize the gains by supporting Six Sigma projects through allocation of resources and removal of roadblocks.

Hold the ground by implementing Black Belt recommendations.

Make sure that project opportunities are acted upon by the organization’s leadership and the finance department.

Recognize people for their efforts.

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Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Master Black Belts Understand the big business picture.

Partner with the Champions.

Get certified as Master Black Belts.

Develop and deliver training to various levels of the organization.

Assist in the identification of projects.

Coach and support Black Belts in project work.

Participate in project reviews to offer technical expertise.

Help train and certify Black Belts.

Take on leadership of major programs.

Facilitate sharing of best practices across the corporation.

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Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Black Belts Act as Breakthrough Strategy experts and be Breakthrough Strategy enthusiasts. Stimulate Champion thinking. Identify the barriers. Lead and direct teams in project execution. Report progress to appropriate leadership levels. Solicit help from Champions when needed. Influence without direct authority. Determine the most effective tools to apply. Prepare a detailed project assessment during the Measurement phase. Get input from knowledgeable operators, first-line supervisors, and team leaders. Teach and coach Breakthrough Strategy methods and tools. Manage project risk. Ensure that the results are sustained.

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Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Green Belts Function as Green Belts on a part-time basis, while

performing their regular duties.

Participate on Black Belt project teams in the context of their existing responsibilities.

Learn the Six Sigma methodology as it applies to a particular project.

Continue to learn and practice the Six Sigma methods and tools after project completion.

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Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Black Belt Activities MENTORS: Cultivates a network of Six Sigma individuals at the local

organization or site. TEACH: Provides formal training of local personnel in new strategies and

tools.

COACH: Provides one-on-one support to local personnel.

TRANSFER: Passes on new strategies and tools in the form of training, workshops, case studies, and local symposia.

DISCOVER: Finds application opportunities for Six Sigma strategies and tools, both internal and external (e.g. suppliers and customers).

IDENTIFY: Highlights / surfaces business opportunities through partnerships with other organizations.

INFLUENCE: Sells the organization on the use of Six Sigma strategies and tools.

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Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Personal & Professional Characteristics of a Black Belt Highly respected by superiors, peers, and subordinates.

Understands the “big picture” of the business.

Focuses on results and understands the importance of the bottom line.

Speaks the language of management (money, time, organizational dynamics, etc.)

Committed to doing whatever it takes to excel.

Sponsored by a vice president, director, or business unit manager.

Is an expert in his or her specific field.

Possesses excellent communication skills, both written and verbal.

Inspires others to excel.

Challenges others to be creative.

Capable of consulting, mentoring, and coaching.

Drives change by challenging conventional wisdom, developing and applying new methodologies, and creating innovative strategies.

Possesses a creative, critical, out-of-the-box intellect.

Allows room for failures and mistakes with a recovery plan.

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Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Accepts responsibility for choices.

Views criticism as a kick in the caboose that moves you a step forward.

Encourages commitment, dedication, and teamwork.

Unites and inspires a team to a core purpose.

Able to communicate all sides of an issue.

Solicits diverse ideas and viewpoints.

Empathizes.

Promotes win-win solutions.

Disagrees tactfully and does not overreact.

Acts decisively under pressure.

Anticipates and confronts problems early and corrects causes..

Effectively identifies priorities from a business standpoint.

Manages limited resources in a highly efficient and effective manner.

Careful not to assign an unrealistic number of tasks to any team member.

Personal & Professional Characteristics of a Black Belt

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Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

Understands and respects that people have limitations. Displays a genuine concern and sensitivity toward others. More concerned about business success than personal gain. Does not lord her or his expertise over others. Recognizes that results count more than fancy titles.

How Many Black Belts Does an Organization Need?

• Revenues/(1 million) = Number of Black Belts

• Number of Black Belts/(10) = Number of Master Black Belts

Personal and Professional Characteristics of a Black Belt

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Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

IXS IGMAS

DEPARTMENT OF STATISTICS

a highly structured strategy for acquiring, assessing, and applying customer, competitor, and enterprise

intelligence for the purposes of product, system or enterprise innovation and design.

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Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

IXS IGMAS DEPARTMENT OF STATISTICS

End of Session

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Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & DesignDr. Rick L. Edgeman, University of Idaho

IXS IGMASClient, Competitive and Enterprise Intelligence

for

Product, Process and Systems Innovation & Design

End of Session