How to Write the Business Case for Six Sigma
After you’ve homed in on the problem area, you need to define the business case for the Six Sigma project approach you’re considering. Writing the business case helps you describe or characterize the issues and estimate the potential value of improvement projects. At this stage, you aren’t looking to define the project but rather to identify the value.
Start with candidate business-case statements
Completing a business-case writing exercise can be an eye-opening and exhilarating experience. Perform the exercise as a team and have each member use 15 to 20 sticky notes to fill in the business-case writing template.
Describing a business problem at the high level doesn’t have to be very detailed. The details come when you define the project itself, just prior to beginning the Measure phase of the DMAIC methodology. At this stage, you’re describing the problem at a business level such as the following:
Excessive warranty returns
High accounts receivable levels
Lack of customer sales order responsiveness
Noncompetitive product yields and cost
Make your best estimate of the potential financial benefit from improvements, based on the data or knowledge you have at the time. In the beginning, just get a number in the ballpark.
Here’s the structure of the business case statement. Use it as a template for your own organization:
As a company, our (insert specific type of) performance for the (name specific area) area isn’t meeting (define goal, target, or other measure). Overall, this is causing (name type of) problems that are costing us as much as $ (list specific amount) per (insert time frame).
Here are some examples:
As a company, our accounts receivable performance for the finance invoicing area isn’t meeting the goal of 47 days sales outstanding. Overall, this is causing cash flow and budget problems that are costing us as much as $4 million per year.
As a company, our final process yield performance for the paint and polish area isn’t meeting the targeted 97 percent yield. Overall, this is causing floor space, shipment, and resource problems that are costing us as much as $900,000 per year.
As a company, our on-time delivery performance for our healthcare products area isn’t meeting the scheduling and delivery cost requirements. Overall, this is causing delivery issues and customer dissatisfaction problems that are costing us as much as $3 million in lost revenues and $1.5 million in expenses per year.
Ask each member of your team to brainstorm in silence, thinking of as many business cases as he or she can and writing the case idea titles on the sticky notes. Each written business case is a stand-alone idea that identifies problem areas. When a team member has exhausted all ideas, he or she sticks those notes on the wall. Each member of the team performs a similar action.
Select the business case
After you’ve drafted a set of candidate business case statements, your next step is to select the business case that will define the basis for your Six Sigma project. Sort through the candidates iteratively, with each member of the team reading all business case ideas and moving them into common clusters. Feel free to move the ideas from cluster to cluster.
Usually, you see a natural emergence of five to ten problem areas, or clusters. Have the team leader for the exercise write a title for each of the clusters, such as “warranty returns,” “accounts receivable,” and so on. Generally, some ideas will be duplicated, but that’s okay; duplication indicates the strength of an idea.
With five to ten different problem areas in hand, your team can now begin adding more data and detail, and even redefine some of the categories if necessary, to help you take the ideas to the actionable level. Next, identify the person most likely to be responsible for each identified area. Because the group makes the decision and the choice is usually obvious, this step goes pretty fast.
Because everyone has been actively involved in this process, each person has a sense of belief in and ownership for the issues and selections. Another important benefit comes from each person having to read and move the notes from one cluster to another; folks process information and become knowledgeable about the broader issues facing the organization instead of only understanding what’s going on in their own respective departments.
This exercise is a great way to create a common platform of knowledge and cooperation, which leads to widespread involvement in improvement actions.
The business-case selection exercise uses the Six Sigma tool known as an affinity diagram. This modified brainstorming technique has the advantage of gathering inputs from all team members without the inhibition of criticism. It also fosters the natural emergence of important groupings or categories of ideas.
You now have a valuable set of data and a knowledgeable team to develop an improvement plan, using Six Sigma. You know the most critical improvements needed, have an insight into the type and scope of needed improvements, know who has responsibility for each improvement idea, and have a sense of the value that can be created by effectively addressing the problems.
This process prepares you to define specific projects to solve elephant-sized problems. You’re now ready to enter the Define phase of DMAIC.
The business-case writing tool is a general-purpose tool that can also be used at the local process levels — and even at a personal level to address value and performance challenges in your own life.