The Cult of Six Sigma |BTalk Australia

(24min 37) Six Sigma is a business improvement pioneered by Motorola, embraced by General Electric and now used by many large corporations throughout the world.

Today on BTalk Australia Phil Dobbie talks to Alan Skinner, a six sigma “black belt” from the Faculty of Business at the University of Technology in Sydney. It’s designed to drive efficiencies, but can its rigorous approach also stifle innovation?

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See also:
Effective Project Management With Six Sigma
Critical Decision Making With Six Sigma Cause & Effects Analysis
Following A Data-Based Approach In The Six Sigma Decision Making Process

• Today’s Transcript

Phil Dobbie: Hello, I’m Phil Dobbie and welcome to BTalk Australia. Today, six sigma. What is it and how does it work? It sounds like a strange religious sect, the six sigma or maybe it’s the latest novel from Dan Brown. In fact, it’s a business process pioneered by Motorola and now used widely in the business community. Alan Skinner, from the faculty of business at the University of Technology in Sydney, knows all about it. He’s also a black belt in six sigma, so it sounds like you don’t want to mess with him. Alan what exactly is it? It’s basically a business improvement process isn’t it? Six sigma?

Alan Skinner: It is. That’s a good way of describing it, Phil. I suppose the complexity, if one can say that, is that the idea of six sigma probably has about three levels or three layers of meaning. It’s actually a statistic that allows you to tell whether in fact what you’re doing is delivering what the customer wants. The actual term six sigma means that about 3.4 out of a million opportunities for doing something wrong or doing something right in front of the customer, only 3.4 times do you make a mistake or deliver a defect and that’s a statistic that helps you calculate that.

Dobbie: So just on that, that’s what you’re aiming for?

Skinner: That’s probably a debatable point in the whole field. You wouldn’t want to aim for that level of perfection but there’s an awful lot of processes you certainly would want even better than six sigma. For example, we don’t want to get on planes, we don’t want surgery where someone’s actually operating at six sigma because even at six sigma there’s going to be quite a few mistakes. We’d want even better levels of performance.

Dobbie: Right.

Skinner: And then there’d be other processes where perhaps the risk and the severity of the impact if the process doesn’t work is not as high, where it’s not necessary to achieve that level of performance. Most of the research suggests that an awful lot of our processes, no matter what they are, are operating at the one, two level of six sigma. Three sigma is in the 90 percent of what you’re doing is fine in front of the customer and then it kind of drops off. So an awful lot of people would struggle even to get to three sigma if you like, Phil. Most of the processes probably would be around 60, 70 percent of what’s being done is meeting customer’s requirements and the businesses requirements and so on.

Dobbie: So the six sigma process is all about understanding how efficient a process is, measuring it and trying to improve it? Is that the basis of it?

Skinner: That’s right and the second bit, once you’ve figured out how bad you are — and obviously how bad you are means you’re throwing money away — inherent in all of that is you’re going to have to fix up the problems in front of the customer, that costs money. Redoing things. So the question then becomes well, how do I fix it? How do I take it from that level of operation to a much better way of doing things and that’s where the methodology kicks in. So when we say six sigma, we’re also meaning a way of conducting an improvement program or project and that means a number of phases. You know, there’re obviously connections with project management but the phases of a project in an improvement orientation is a little bit different because we don’t know the solution often. So it’s more like the doctor giving you tests to figure out what it is and then working out the best way or a detective trying to collect the clues and then figure out how do I actually solve this?

Dobbie: Right.

Skinner: And that’s where more the methodology is around. So it’s not like you can predict exactly what you’re going to discover and exactly what steps you’ll take.

Dobbie: Right. So with a project normally you’d be saying we’re going to build this. With the six sigma process you’re saying, you’re really starting with an issue.

Skinner: Yeah.

Dobbie: And we’re saying how are we going to resolve this?

Skinner: Yes. Yes.

Dobbie: But isn’t it restricted to issues where you have a lot of statistical data that you’re using at the beginning — doesn’t that restrict how it can be applied? Aren’t you really confined through areas where you have a lot of data?

Skinner: In one sense you would say yes. Because at the heart of the philosophy or at the heart of the discipline is that if you can’t tell whether you’ve improved anything, how can you claim you’ve improved anything? And that means two things. Before you actually started, what was it like? How was it performing? So you actually have to have some kind of data that tells you what the baseline performance is and then of course, when you’ve actually implemented solutions, did it make a difference? And so, if you’re going to claim that you’ve improved something, things are better, etc, you can’t just say I got busy and I implemented these activities and I did this. But what was the effect?

Dobbie: Yeah.

Skinner: And that’s the discipline that the whole methodology brings and in that sense you do need data. Now if you don’t have any, the challenge will be what should I be measuring and so on you know. But you definitely need some way of quantifying and describing whether there’s been an improvement. Change doesn’t always mean improvement. People can change things, things can get actually worse and that’s where the discipline of this methodology challenges people to think about did this make an actual difference, an improvement. I’ve got to measure it some way.

Dobbie: Doesn’t it also, if you’re talking about improvement, restrict its application to things that already exist? So for example, driving internal efficiencies as opposed to creating a new product, for example.

Skinner: Yes, that’s a good point to make. I guess as the whole field has developed, the methodology applies in more than one context. Certainly where you have problems is one context and usually one can think of that in two broad ways. You can break this down a number of ways but, two broad ways. You’re making mistakes in front of your customers in your market and that’s not a great thing. And the second is it’s a problem internally. It’s not necessarily driven by the customer. And then you have situations where there are no problems and you just describe them. You’re developing, you’re doing research, you’re developing new products, you’re designing a new process — it’s green field. In those circumstances, there’s a slightly different methodology that applies. It’s called design for six sigma. A whole family of models, popularised by General Electric. But you know, in essence, the concepts and the principles behind how you would conduct that improvement still apply. And at the end of the project, what you’re trying to see is what actually happened matches what you predicted. In other words, you’ve avoided mistakes, you want the design to operate in a particular way, you want customers to experience a certain thing.  Did you get there? And so that methodology kind of is more oriented to that sort of answer. Whereas, if you’ve got a problem, the methodologies are oriented towards what was the problem, let’s quantify it and then after you’ve made some changes, has it actually got better?

Dobbie: Now most projects not using six sigma, I mean you’d still apply a lot of these principles wouldn’t you? You’ve drawn a lot of data to try and provide the business case for savings or incremental revenue that the project’s going to deliver, a lot of the time though — I’ve seen it a million and one times — you overestimate the saving or you over-forecast your sales. So why is this process any different? Is it just more rigorous?

Skinner: Certainly that would be one aspect to it. The discipline and the rigour of I would say both thinking and actual execution. So if you think about the stickability of doing a project, it starts with the leader actually says this is something that’s really important to the business and drives it from that perspective. The actual methodology in stages or phases of the project gives you a discipline to follow within that. You’re using particular tools and so on. And the power of it for me is that a critical point in your project is you’ve developed a theory that predicts performance. You understand things well. And that’s where part of the rigour and discipline comes in. You’re just, you’re not just making changes willy-nilly, you truly understand the levers that will deliver an effect. So you can predict, not just guess or hope, you can predict that when you implement something, because you understand the cause and effect relationships, you are going to get a result and that’s very powerful for a business to say you know, to the strategy I’m working at, to the kind of collection of processes and the way they should operate. If I run it this way then I know I’m going to get this kind of performance. I’m not guessing, I’m actually managing the business to that. And inherently that means you know, you’re managing waste, you’re managing the bottom line. You’re managing the dollars going out and you’re managing the kind of revenue and margin you’re making. And that discipline, that rigour of thinking, that rigour of practice, as much as anything, contributes to the powerful outcomes and obvious results that people get.

Obviously the methodology is a key part to it, but it’s the rigour and I think when we look at how people normally do projects, if I give you some examples of stories where you go and find out how people have actually wrestled with a problem, often it’s a team of people and they’ve got 30 or 40 actions outstanding and they’re trying to progress them all. There isn’t this clear rigour of let’s just understand what was going on first, come up with some solutions pilot if we need them, implement and while we’re doing that use tools and so on in a systematic fashion. It’s a much looser if you use an argy-bargy kind of fashion. In some instances, people don’t even measure. I think most people, when they are tackling improvements without a particular philosophy or without a particular methodology, often they’re oriented to the solution. They just jump to the solution. They just want to make the change. You know, that’s a natural inherent human behaviour. The problem is those changes may not be tackling the real causes, they may not be tackling the critical ones and so you don’t get the effect. Whereas this methodology challenges the team and the individuals involved. Do you really understand what’s going on? What is your theory? How have you validated it? OK, what solutions will you develop to actually tackle that system that causes those individual causes and did you actually make a change? That’s the real discipline it brings to the whole methodology. And the other piece is, which is where the contribution of the six sigma pieces come in, it also forces people to quantify their return on investment.

Dobbie: Right.

Skinner: It makes them think if you are going to tackle this problem, how is it hurting the business financially? So what is the cost of poor quality while this is going on? And so by the time you’re finished, what’s the return on the investment? That’s another thing that maybe people haven’t always done and so the methodology gives people you know, ways of tackling that kind of thing. And that’s been very helpful as well for people.

Dobbie: It’s been used a lot in big business, Motorola started it, you mentioned General Electric, I mean they took it on board. What sort of corporations are using it in Australia? Is it common in this country or is it still very much on a growth curve?

Skinner: It’s pretty common. More common than what you would think and all different layers of organisations. Obviously at some point most of the multi-nationals in this country would have quite extensive programs and then as you come down the medium, the small enterprises, etc — it varies, you know.

Dobbie: Can they still benefit?

Skinner: Absolutely.

Dobbie: The smaller the organisation?

Skinner: Absolutely. I suppose another myth perhaps within the whole approach has sometimes been you know, it’s pictured as a cumbersome process that you need large groups of people and so on. No, you can accelerate the improvement activity and one of the things or approaches that General Electric popularised and other people have tried, is what’s called a kind of burst approach. You have an intense workshop, subject matter, experts are brought together to really focus on the problem. You know, then and there solutions are developed and obviously, you know, a way into moving to trying it out. And so there are scaled down ways of doing this within small organisations, and large organisations, even the smallest of organisations. There are principles underpinning the whole thing and it’s the practice of those principles no matter what scale you’re working on, that’s going to give you returns. For example, do you really understand the system of work? Do you understand the variation in the way in which your performance has gone? Have you studied you know, how you, step back and studied how your performance is going or are you just tweaking it and making things worse you know? Those kinds of capabilities and disciplines, etc, helps anybody. It doesn’t matter what industry, it doesn’t matter what size, and I guess that’s one of the attractive aspects of that sort of methodology.

Dobbie: So how should it be implemented?  Particularly in a larger organisation. Should everyone in management be trained or do you just call on particular project managers or do you have a SWAT team that you can call on?

Skinner: Yeah, it depends on the circumstances you’re in. The most mature and the more likely process for success would be to get your leaders involved. Where you really get benefits from this methodology is to have the leadership team driving the agenda for improvement. Picking things that are real key gaps in the business, based on their strategy and the say they’re operating. That way you’re not working on things that sort of you know, lower down and less important. You’re really tackling the most important things. And secondly, they’re driving it. They’re governing the process and making it happen. That’s probably the most effective way of doing it. So you involve your leadership team in understanding what the methodology is, you enable them, actually therefore practice it, develop a management practice where together with their business plan they call out an improvement agenda, they then allocate it to teams then, people who have been trained in the methodology and they sponsor it. They like govern it. Properly see what the effects are and continue to drive it that way.

Dobbie: Well it seems that’s what happened at Telstra. Ziggy Switkowski I think is a big supporter of it. Sol Trujillo is not.

Skinner: Yeah.

Dobbie: So six sigma was flavour of the month. Now I think you’d find it hard to find anybody who’d confess to being a six sigma advocate in Telstra. Why do you think that is? Is it, some people criticise it because it stifles innovation? Do you think that’s part of it?

Skinner: You’ve raised two good points, Phil. The first is that I think that most people discover soon enough, that if you don’t have a leadership team who really practices this as a management practice, as a management philosophy, it’s difficult to create an environment in which projects are actually complete, the right projects are selected and then projects actually complete their work. Because essentially if management is fairly lassez faire about it you know, it doesn’t matter whether you do it or don’t do it, the survivability of the project, the interest in it, the motivation to complete it is just not there. The support to actually push through things, get over barriers, is just not there. I mean, you could get by with departments having a go and improving things themselves, even teams, but to really get the multiplier effect, you really need the business to come together. Because many times in front of the customer you need multiple departments working in cooperation across boundaries to actually improve things. And that’s where you really need leaders who bought into the whole management practice and are driving it themselves. They’ve got to be believers and in fact, in some companies when you look at the history of them, whether it’s Motorola, Allied Signals, General Electric, the IT industry, or pharmaceuticals. When you look at the patterns, that’s what you begin to notice. The senior leadership team is really driving this.

The second question you raise is a good one about innovation. One of the things again people are discovering is that during the design phase of projects, you know when you’ve understood look you know, this is what’s actually going on. Here’s our cause and effect relationships, our system of causes, the generation of ideas to deal with it can be at the logical perspective and that is the logical consequence of this means we need to have this kind of solution. And at the other end of the spectrum is really the discipline application of creativity techniques. And so organisations are learning to apply, for example, some of de Bono’s techniques to push the envelope. Not to think within the kind of boundaries that they used to and in fact to challenge them. And so you can actually bring in deliberate creativity tools into the design phase to develop solutions that are beyond what perhaps people have been used to not accepting what was there before. So it’s not true, in one sense, to say that this methodology blocks out any sense of creativity, in fact this methodology has heaps of opportunities to bring creativity into the whole process from designing the experience you want for the customer when you’ve figured out what’s wrong to process changes, tools, etc. Really, really being creative in those things. The problem is that when you’re perhaps say using a very deliberate structured logical approach, sometimes remembering to bring in the other side of the brain and be creative is forgotten. And those methodologies that again bring the creativity techniques in a discipline fashion find that they get much more out of it than those that are just treating the methodology as a very linear process, very logical and don’t really use creativity in it.

Dobbie: Right, so that leads me to my final brief question: left and right brain — can anybody be a master of the discipline or does it lend itself to people are more logical in their approach?

Skinner: I think pretty much anybody. Because we can all kind of overcome come of our natural propensities towards working in particular ways. So the less analytical person can learn tools and techniques to be more analytical. The ability to actually engage with people because a lot of the work involves talking to people, understanding how work’s carried out. And so you know, perhaps if you’re more on the introverted side you need to develop facilitation skills and be a little bit more out there. My view is that anybody can learn this. On the people’s side, one of the side effects of the whole methodology, is it’s a way of engaging people and giving people a chance to actually work on the processes that sometimes they’re the prisoners to, and that gives them motivation and enthusiasm and when you’ve got leaders who are encouraging them, it becomes a very positive atmosphere. I guess one could argue the person who is inherently, naturally analytical, who’s inquisitive, who’s curious, who has capability to actually work with people, easily talk to people at different levels within the organisation, those are the people who are going to obviously just slide into this really easily, Phil. They’ll just have a natural inclination for it you know.

Dobbie: OK, now I think I said my last question was the final question but maybe this will be the final question. What’s the difference between six sigma and lean six sigma?

Skinner: The main difference, Phil, is what lean brings to the table and why. Now people talk about lean six sigma instead of just six sigma. Lean was popularised by Toyota, discovered by people like Womack from MIT, where obviously Toyota over forty years or has been building this incredible quality management practice, which they call the total, their production system. And when James Womack saw it he thought wow, and coined the phrase lean. Lean really means how can we improve things by taking out waste and improving flow and speed. And generally the principle is that slow processes are wasteful processes. So what lean brings to the table in the whole methodology is looking at processes to reduce waste, improved the flow and still be you know, customer focused and so on. And therefore there is a set of tools that give people eyes to see their business from that perspective.

Dobbie: So this is.

Skinner: That combined with the six sigma sets of tools, which is much more kind of oriented towards understanding variation in performance where defects are occurring and why they’re occurring. The combination of the two gives a great, powerful set of methodology and tools to actually go and tackle all kinds of problems in the business.

Dobbie: This is like the just-in-time style management.

Skinner: The just-in-time is one part of it. You’ve got just-in-time, there are things called the IU string mapping and the five S’s and so on. Lean actually is a much more intuitive, in some ways simpler tool set because it comes out of the manufacturing environment where physical waste is easy to see. So many of the techniques that evolved like just in time, reduced inventory, things coming together you know at the right time, the Kanban system which is simply a signaling system when you need more stuff. All of these things come together because Toyota wanted something which allowed them to be flexible; they couldn’t be like Ford for example, when they went and investigated it. They had to develop a system which allowed them to quickly change over, reduce waste and so on. So all the tools and techniques come from looking at things where you’re trying to improve speed, quickly change over, be flexible and not have a lot of waste and that’s and therefore you can imagine the tools and techniques that evolved from that kind of study over 40 years or so. That tool set combined with the other gives you a very powerful combination.

Dobbie: Right. OK, so you’re now a lean black belt.

Skinner: Yeah.

Dobbie: Lost a bit of weight. Thanks for your time today, Alan.

Skinner: Thank you.