six-sigma

Six-sigma is a method for achieving process excellence

Six-sigma described --
Source: At 3M, A Struggle Between Efficiency And Creativity, How CEO George Buckley is managing the yin and yang of discipline and imagination, Business Week, JUNE 11, 2007, Inside Innovation Section

Six Sigma, which originated at Motorola (MOT ) in 1986 and became a staple of corporate life in the '90s after it was embraced by GE. The term is now so widely and divergently applied that it's hard to pin down what it actually means. At some companies, Six Sigma is plainly a euphemism for cost-cutting. Others explain it as a tool for analyzing a problem (high shipping costs, for instance) and then using data to solve each component of it. But on a basic level, Six Sigma seeks to remove variability from a process. In that way you avoid errors, or defects, and increase predictability (technically speaking, Six Sigma quality has come to be accepted as no more than 3.4 defects per million).

DMAIC --
At 3M, McNerney introduced the two main Six Sigma tools. The first and more traditional version is an acronym known as DMAIC (pronounced ""dee-may-ic""), which stands for:

• define,
• measure,
• analyze,
• improve,
• control.

These five steps are the essence of the Six Sigma approach to problem solving.

DFSS --
The other flavor is called Design for Six Sigma, or DFSS, which purports to systematize a new product development process so that something can be made to Six Sigma quality from the start.

Thousands of 3Mers were trained as black belts, an honorific awarded to experts who often act as internal consultants for their companies. Nearly every employee participated in a several-day ""green-belt"" training regimen, which explained DMAIC and DFSS, familiarized workers with statistics, and showed them how to track data and create charts and tables on a computer program called Minitab. The black belts fanned out and led bigger-scale ""black-belt projects,"" such as increasing production speed 40% by reducing variations and removing wasted steps from manufacturing. They also often oversaw smaller ""green-belt projects,"" such as improving the order fulfillment process. This Six Sigma drive undoubtedly contributed to 3M's astronomical profitability improvements under McNerney; operating margins went from 17% in 2001 to 23% in 2005.

While Six Sigma was invented as a way to improve quality, its main value to corporations now clearly is its ability to save time and money. McNerney arrived at a company that had been criticized for throwing cash at problems. In his first full year, he slashed capital expenditures 22%, from $980 million to $763 million, and 11% more to a trough of $677 million in 2003. As a percentage of sales, capital expenditures dropped from 6.1% in 2001 to just 3.7% in 2003. McNerney also held research and development funding constant from 2001 to 2005, hovering over $1 billion a year. ""If you take over a company that's been living on innovation, clearly you can squeeze costs out,"" says Charles O'Reilly, a Stanford Graduate School of Business management professor. ""The question is, what's the long-term damage to the company?""

Six-sigma and innovation --
Source: At 3M, A Struggle Between Efficiency And Creativity, How CEO George Buckley is managing the yin and yang of discipline and imagination, Business Week, JUNE 11, 2007, Inside Innovation Section

Buckley, a PhD chemical engineer by training, seems to recognize the cultural ramifications of a process-focused program on an organization whose fate and history is so bound up in inventing new stuff. ""You cannot create in that atmosphere of confinement or sameness,"" Buckley says. ""Perhaps one of the mistakes that we made as a company-it's one of the dangers of Six Sigma-is that when you value sameness more than you value creativity, I think you potentially undermine the heart and soul of a company like 3M.""

In recent years, the company's reputation as an innovator has been sliding. In 2004, 3M was ranked No. 1 on Boston Consulting Group's Most Innovative Companies list (now the BusinessWeek/BCG list). It dropped to No. 2 in 2005, to No. 3 in 2006, and down to No. 7 this year. ""People have kind of forgotten about these guys,"" says Dev Patnaik, managing associate of innovation consultancy Jump Associates. ""When was the last time you saw something innovative or experimental coming out of there?""

While process excellence demands precision, consistency, and repetition, innovation calls for variation, failure, and serendipity.

Indeed, the very factors that make Six Sigma effective in one context can make it ineffective in another. Traditionally, it uses rigorous statistical analysis to produce unambiguous data that help produce better quality, lower costs, and more efficiency. That all sounds great when you know what outcomes you'd like to control. But what about when there are few facts to go on-or you don't even know the nature of the problem you're trying to define? ""New things look very bad on this scale,"" says MITSloan School of Management professor Eric von Hippel, who has worked with 3M on innovation projects that he says ""took a backseat"" once Six Sigma settled in. ""The more you hardwire a company on total quality management, [the more] it is going to hurt breakthrough innovation,"" adds Vijay Govindarajan, a management professor at Dartmouth's Tuck School of Business. ""The mindset that is needed, the capabilities that are needed, the metrics that are needed, the whole culture that is needed for discontinuous innovation, are fundamentally different.""

See quality.