Tracing the Roots and Meaning of Six Sigma - dummies

Tracing the Roots and Meaning of Six Sigma

The Six Sigma methodology was formalized in the mid-1980s at Motorola. New business and management theories and ideas were combined with basic principles and statistical methods that had existed in quality engineering circles for decades. The building blocks were enhanced with business and leadership principles to form the basis of a complete management system. The result was a staggering increase in the levels of quality for several Motorola products, and the inaugural Malcolm Baldrige National Quality Award was bestowed on the company in 1988.

Everyone wanted to know how Motorola had done it. Then-president Robert Galvin chose to share Motorola’s Six Sigma secret openly, and by the mid-1990s, corporations like Texas Instruments, Asea Brown Boveri, Allied Signal, and General Electric had begun to reap similar rewards. By 2000, many of the world’s top corporations had a Six Sigma initiative underway, and by 2003, over $100 billion in combined savings had been tallied.

Six Sigma became the global standard of quality business practice, embraced by the American Society for Quality. Universities worldwide now offer courses. Dozens of consulting and software companies have brought products and tools to market. By the end of 2004, over 200 books on Six Sigma were in print, and entering the term “Six Sigma” into Google returned some 2,320,000 hits.

Defining the Six Sigma phenomenon

Six Sigma is a methodology for minimizing mistakes and maximizing value. Every mistake an organization or person makes ultimately has a cost — a lost customer, the need to do a certain task over again, a part that has to be replaced, time or material wasted, efficiency lost, or productivity squandered. In fact, waste and mistakes cost many organizations as much as 20 to 30 percent of their revenue! That’s a shocking number. Imagine throwing 20 to 30 percent of your money away in the garbage every time you cash a check. It may sound ludicrous, but that’s what many organizations do.

All businesses, organizations, and individuals have room to improve. No operation is run so tightly that another ounce of inefficiency and waste can’t be squeezed out. By their nature, organizations tend to become messy as they grow. Processes, technology, systems, and procedures — the ways of doing business — become cluttered with bottlenecks, meaning work piles up in one part of the organization while other parts sit idle with nothing to do.

Work is often performed incorrectly, or the outcome is flawed in some way. When this happens, you scrap products and services and have to do the work over again: You consume additional resources to correct a problem before it’s delivered to the customer, or the customer asks later for a “redo” — a new product or a more satisfactory service.

Sometimes, flaws and defects aren’t the problem, but a product or service simply takes too long to produce and deliver. Think about the problems a mortgage company would have if it processed home loans perfectly, but did so 5 times slower than the competition. That’s a perfect disaster.

Six Sigma was once a quality-improvement methodology, but now it’s a general-purpose approach to minimizing mistakes and maximizing value: How many products can you produce, how many services can you deliver, how many transactions can you complete to an expected level of quality in the least possible amount of time at the lowest possible cost?

Six Sigma takes effort and discipline and requires you to go through the pain of change. But soon the pain is transformed into improved performance, happier customers, lower costs, and more success.

The managerial perspective of Six Sigma

While Six Sigma has its many definitions, Six Sigma action occurs on two different levels: the managerial and the technical. At the managerial level, a Six Sigma initiative includes many units, people, technologies, projects, schedules, and details to be managed and coordinated. There are also many plans to develop, actions to take, and specialized work to complete. For all of this to work in concert, and for the technical elements of Six Sigma to be effective, you have to set the proper management orientation.

From a management standpoint, Six Sigma culminates in the predictability and control of performance in a business or a business process, by applying the methods of science to the domain of leadership.

Early in the twentieth century, Henry Ford applied the principles of science to the production of cars. By following set processes and by optimizing repeatable processes, Ford and others made goods that displayed little variation in their final states and could be mass-produced without requiring extensive education and years of finely honed skills among the assembly-line staff. We have witnessed how the achievements of machinery, technique, process, and specialization of labor collectively enable the explosion of mass-production and the consumer society. Science dictates how all the parts, materials, machines, and people on the assembly line interact to turn out many “widgets” at the highest possible speed and the lowest possible cost.

Managerially speaking, the goal of Six Sigma is to inject similar control, predictability, and consistency of results into the production of a successful organization, such that the widget comes off the production line absolutely consistently.

Countless times every day in the United States, people open a water faucet and experience the flow of clean, clear water. The reason is because reliable purification systems treat the water and pressure systems ensure the water is there. This is what Six Sigma does; it treats the processes in a business so that they deliver their intended results reliably and consistently.

The methodology of Six Sigma was first applied in a manufacturing company, but it also works in service and transactional companies (like banks and hospitals), where it has been implemented many times with great success. Six Sigma dramatically improves the way any process works — whether that process is in the chemical industry, the oil industry, the service industry, the entertainment industry, or anything else.