The Six Sigma Credo–Changing What Companies Measure


According to the authors Ikel Harry, Ph.D., and Richard Schroeder in the fifth chapter of their book SIx Sigma:  The Breakthrough Management Strategy Revolutionizing the World’s Top Corporations, Six Sigma is a tool for changing the processes that companies use to create their products or services in order to improve their quality.

However, there is two caveats to this statement.    In order to change a process, you have to be able to measure it.   Also, improving quality does not mean getting rid of defects.   A defect-free product which a customer does not want is not going to be sold.    So what companies need to do is measure their customer’s opinions, and then to link those measurements of the customer’s requirements to a company’s processes.

How do companies fail at this central task?    Some don’t measure quality accurately in the sense of quantitatively capturing their customer’s opinions.   Some take these measurements of quality but don’t follow them up to make sure that the customer’s requirements are linked to a company’s processes.    Some fail to describe their processes in terms of numbers, rather than words.

The author’s basic credo (listed in italics in the first paragraph) has a negative corollary:  if you don’t understand your processes quantitatively, you can’t control them.   These processes have to be correlated with a customer’s opinions, as mentioned above, but they also have to be correlated with the company’s fundamental economics.   This is the only way to make sure that a company’s business case for producing the product is solid.

How are processes described quantitatively?   By the use of metrics, which are discussed in the next post.

Six Sigma–What Should Companies Benchmark?


In the fourth chapter of their book Six Sigma:  The Breakthrough Management Strategy Revolutionizing the World’s Top Corporations, Ikel Harry, Ph.D. and Richard Schroeder discuss the issue of benchmarking:   what it is, why companies should benchmark, what categories of benchmarking exist, and how Six Sigma methods can assist in benchmarking.   All of these topics are discussed in previous posts.

The final topic of the chapter is:  having discussed the various types of benchmarking and their methods, what specifically do the authors recommend that a company should benchmark?   Here are their suggestions of topics to consider:

1.   Customer satisfaction

2.   Internal areas of competition (between divisions)

3.  External areas of competition

4.  Major cost drivers

5.  Easily improved processes

6.  Product characteristics (to differentiate yours from those of competitors)

7.  Critical-to-quality characteristics (CTQs)

No matter what you choose to benchmark, the authors agree on one thing:   it has to be something that the company does on a continuous basis.   Why?   The purpose of benchmarking is to improve your company and its processes.  But just remember, other companies are improving their processes at the same time.   Your competitors are (or should be) moving targets!

Six Sigma and Quantitative Benchmarking


Six Sigma is known for using statistical methods.   And this is why is it useful for benchmarking.   In their book Six Sigma:  The Breakthrough Management Strategy Revolutionizing the World’s Top Corporations, by Ikel Harry, Ph.D., and Richard Schroeder, the authors describe three kinds of benchmarking, internal benchmarking (comparing divisions within a company), competitive benchmarking (comparing with competitors within an industry), and functional benchmarking (comparing with competitors across industries).  These three types of benchmarking are discussed in more detail in the previous post.

But how do you compare in such a way as to make sure you are comparing apples to apples, and not apples to oranges?  You use the process of quantitative benchmarking, which allows such a comparison.   It has two components.

1.  Yield or defect rate

For a particular product, service, or transaction, the percentage of units of production that come out defect-free is called the final yield.   The defect rate is therefore 100% minus the yield rate.   So a process that has a 15% defect rate has a 85% yield.   They are two different ways of measuring the same phenonemon.

2.  Opportunities for defects

If there are ten processes that are involved in making a unit, and each one has five different ways of creating a defect, then there are 10 x 5 = 50 opportunities for defects involved in the manufacture of that unit.   Obviously then, the more complex the product, and the more complex the manufacturing process to create that product, the higher the number of opportunities of defect will be.

What you do is take the yield to the power of 1 over the number of opportunities for defect, and you will get the average yield per opportunity for a defect.   This expressed in percent can be converted to a sigma level.   Here’s an example from the book.

Product Final

Yield

Defect

Opportunities

Average  Yield

Per Opportunity

Sigma

Level

A 85% 600 .85 ^ (1/600) = 99.97% 3.5
B 96.8% 48 .968 ^ (1/48) = 99.97% 3.5

So product A and B, despite being of different complexity, can still be compared with this method with the result that each product has the same capability per opportunity.  This allows the benchmarking of quality of similar processes, even if they produce products that have widely varying yields and number of opportunities for defects.

It is the statistical tools of Six Sigma that allow benchmarking beyond the mere competitive benchmarking, which is more common, to the more ambitious functional benchmarking that allows one to learn from a wider variety of “best practices” not just in one own’s industry, but across all industries.   Then Six Sigma can be used to implement measurable change within one’s own company and processes to match those that are best-in-class,

So what specifically do the authors recommend companies benchmark?  That is the subject of the next post.

Six Sigma–The Three Types of Benchmarking


When you think of benchmarking, the usual picture that comes to mind is a comparison of your product or service with that of your competitors.  In their book Six Sigma:  The Breakthrough Management Strategy Revolutionizing the World’s Top Corporations, the authors Ikel Harry, Ph.D., and Richard Schroeder show that there are three types of benchmarking.

1.  Internal Benchmarking

This kind of benchmarking is a comparison among diverse functions within a single company, to see how efficiently processes are carried out between divisions.    This is a type of benchmarking that is good for rationalizing the processes in a company to make them internally consistent.

2.  Competitive Benchmarking

This kind of benchmarking is the one people normally think of when they hear the term “benchmarking.”   It is a comparison of the processes of one’s company with that of one’s direct competitors.  It is not just used for improving by using the “best practices” of competitors; it can be used to identify similar processes in a competitor.   This can make competitors potential candidates for mergers and acquisitions if enough similar processes can be identified, because the merging of the two companies will be less traumatic if their processes are similar.

Comparing customers’ reactions to one’s products to those reactions to one’s competitor’s products can also be instructive.  It can help your company recognize what its strengths and weaknesses are with regard to the competition.

3.  Functional Benchmarking

Less well-known that the other two types of benchmarking, this takes processes and compares them not with the processes of other competitors within the same industry, but across industries as well.   This requires processes that, of course, are not specific to an industry, but are used within the overall sector, for example, a comparison of the average number of annual training hours required of employees.  Here what you are doing is expanding the scope of the inquiry into what “best practices” are, and you are in fact widening the playing field of examples to learn from.   This is why it is the most forward-thinking of the three types of benchmarking, and the authors credit Motorola’s success on the Bandit pager project to a large extent on the extensive functional benchmarking they did to improve their manufacturing processes in preparation for the project.

So now having established the different kinds of benchmarking, at least with regards to how wide the base of comparison is to be, the authors then discuss why Six Sigma is helpful in the benchmarking process.   That is the subject of the next post.

The Daily Evolver–Gateway to Integral Theory


I’ve written a previous post about the website The Daily Evolver, which belongs to Jeff Salzman, back on October 5, but I wanted to write another post because I’ve really gone more into depth into the website after going and listening to all the programs available on the The Daily Evolver podcast.

Jeff Salzmann has two kinds of podcasts, one of which I refer to as the ascending current, where he has a conversation with Dr. Keith Witt, an integral psychoanalyst who is knowledgeable about the latest research in neurobiology.   He and Dr. Witt have conversations about integral theory and psychology in a segment he calls “The Shrink and the Pundit.”

Then there are the podcasts that I refer to as the descending current, and these are where Jeff Salzmann takes some topic fresh from the news headlines and analyzes it according to integral theory.   Both of these podcasts are illuminating, and I have enjoyed both of them.

However, the podcasts go back to March 30, 2013.   On the website The Daily Evolver, I found that there are additional podcasts available going as far back as February 26, 2011.   Some of these are full-length programs, others are short, 5-7 minute samples of the full-length program, which is available for a subscription to Integral Life.    I highly recommend this if you can afford $99 for a full year subscription (a better deal than the monthly subscription price of $14.95/month) because you not only get access to Jeff Salzman’s archives, but those of the entire spectrum of programming on Integral Life, of which The Daily Evolver is only one offshoot of money.

In additional to archived podcasts before March 30, 2013, there are also articles and other interviews that are not part of the “Shrink and the Pundit” or the other type of podcast, wehere Jeff Salzman analyzes current events according to Integral Theory.   For these reasons I recommend listening to the podcast, but also checking out his website.

A final portal to Jeff Salzman’s work on integral theory is YouTube–there are quite a few videos, some of which are referenced on the Daily Evolver, but others which show up in other channels, like the new Conscious 2 television program from the UK on which Jeff Salzman appears numerous times.

As I mentioned on my previous post, the reason why I’m devouring as much as I can of Jeff Salzman’s work is because it really inspired me to learn more about integral theory.    I used the excuse that, well, there’s no one I know of that is also interested in integral theory, so I don’t know anybody to converse with about the things I read or watch related to it.   But after I listened to Jeff’s podcasts and videos, I realized he is conversing with me.   I need to converse with myself about the material, and have the faith that I will end up connecting with others who have the same interest in the material as I do.

Also, I have to say that having an integral perspective gives you grounds for being an optimist, which seems so counter-intuitive given the tenor of much of what you read in the newspapers.   So don’t go for gloom and doom, go for ZOOM!, which is what will happen to your evolution when you tune into The Daily Evolver!

Six SIgma–Why Benchmark?


In the fourth chapter of their book Six Sigma:  The Breakthrough Management Strategy Revolutionizing the World’s Top Corporations, the authors Mikel Harry, Ph.D., and Richard Schroeder discuss the issue of bench-marking and how it is related to Six Sigma.   Benchmarking is basically comparing your company’s business and industrial processes to those of their competitors.   The goal is identifying your company’s strengths and weaknesses vis-a-vis the competition.

Some companies don’t benchmark because they feel they are already better than the competition, or that a comparison with the competition is impossible because their company culture is “unique”.   Let’s take the second excuse for not benchmarking first:   a company culture may be unique, but in all likely the business and industrial processes are not.   There must be some processes that a company has in common with the competition.

The first excuse depends on what the Six Sigma level is of the company and its competitors.   If your company is at 5 Sigma, and the competition is at 4 Sigma, that’s one thing.   But what if there is only a difference of, say, 0.4 Sigma between you and the competition?   That’s not a lot of gap between you and the competition.    What’s more, if your company is at 3.5 to 4 Sigma, and the competition is not as good as you are, that still puts you in the category of average as far as all companies are concerned.

Here’s some characteristics of such an “average” company whose processes are between 3.5 and 4 Sigma:

Although it has a quality-assurance program, and is profitable and growing:

  • It spends 20-30% of sales dollars repairing or reworking products before shipping.
  • It contracts with 10 times the number of suppliers necessary.
  • 5-10% of its customers are dissatisfied with the product, sales, or service and would not recommend the product or service to someone else.
  • It does not believe that the goal of zero defects (6 Sigma) is realistic; however, it is also unaware that increasing to a best-of-class Sigma level (5.5 Sigma) would make their product 100 times more defect free.

This is why a company should benchmark–because complacency may prove fatal if the competition gets it into their heads to take up a quality-improvement like Six Sigma, and overtake your company while it standing still.

Six Sigma–Shifting the Focus from Manufacturing to Design


In the last section of the third chapter of their book Six Sigma:  The Breakthrough Management Strategy Revolutionizing the World’s Top Corporations, the authors Ikel Harry, Ph.D., and Richard Schroeder describe how to achieve the highest quality improvements using Six Sigma:   by shifting the focus from manufacturing in such a way as to minimize defects, to designing in such a way as to eliminate them from the start.

Experts have shown that 70-80% of a product’s total cost is determined by its design, meaning that the higher the quality that is designed into the product, the lower its cost.   About the same percentage of quality problems are actually designed into the product.   So the initial Six Sigma projects that correct for defects in the manufacturing stage may only account for 20% of the quality problems.

To go beyond this, therefore, companies need to focus on designing quality in, rather than trying to inspect it in.   How does a company go about this?   The first place to go is gather and analyze customer feedback, to show how a product is actually used by the customer.

In fact, some of the findings with regards to the Six Sigma Breakthrough Strategy are:

  • Businesses that achieve a level of superior quality are three times more profitable than those that achieve inferior levels of quality.
  • Businesses that improve their quality gain 4% in market share each year.
  • Each significant positive shift in process capability equates to 10 times improvement in profitability.
  • Businesses that achieve significant quality improvements earn 8% higher prices for their products.

And these significant quality improvements can usually be gained only when a company reexamines its design process to design quality it, rather than try to correct the “baked-in” quality problems on the manufacturing line.

Of course, it’s not enough to have good quality, it’s important to have better quality than your competitors.   To make sure of this, companies need to participate in “benchmarking,” which is the subject of the fourth chapter of the book, and the next few posts.

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