|
|
|
|
Six SigmaAs you read this you may be thinking that you are coming to the six sigma party too late. Your competition is ahead of you and they are rolling in six sigma cost savings. Now are you going to invest in Six Sigma Training or Consulting? Actually you are looking at six sigma at a good time. It is now a mature process and six sigma is moving from fad to its next stage. Six sigma was developed as a management concept by Motorola in the early 1990’s but it wasn’t until Jack Welch embraced it for General Electric (GE) in 1995. GE has done well although I sure wish my shares would recover to their pre 2001 levels. GE’s inertia is slowing as others innovate and create. At this stage however, some (at least 40% by current estimates) six sigma programs have failed to achieve their lofty goals and have slowed or stopped. One study cited in Chief Executive Magazine (Jan/Feb 2007) showed that 53 of 58 companies underperformed the S&P500 after adopting Six Sigma. A decade into this enthusiastic rush to adopt six sigma the bloom is coming off the rose. The deficiencies of this approach to fixing everything within the company are creating companies with a myopic view beyond their borders. They are losing sight of innovation and creativity that drive new products and new markets. This is the same problem that plagued the cost reduction (at any cost) drive of the 1980’s. You just cannot cut yourself to sustained success.
Profit is a function of revenue, loss and expense. Six sigma addresses loss and expense with powerful statistical tools borrowed and reframed from the Total Quality Management (TQM) a management fad of the 1970’s that itself has undergone maturation. When we look at six sigma in the context of other profit improvement methodologies, we can see this lack of focus on the revenue side of the business profit equation. So what are we to do? Six Sigma summary and recommendation:The simple problem is that there is no perfect solution. Try as we might these programs always leave something out or we try to apply them too broadly and they end up getting applied where they just won’t work in a cost effective manner. A few months ago a company (not quite $1 billion in sales) contacted me about profit improvement. I was happy to help them but I recognized immediately what the competition was when they said they had a $3,000,000 budget for implementation. The only program that costs that much to implement today is six sigma. They have a 40% chance of failure according to current six sigma implementation reports. In my 30+ year experience they should save 75% of their budget by skipping the six sigma Kool-Aid. They can choose the best of the best from TQM, Six Sigma, Cost Reduction, Suggestion Programs and more to build something that is tailored to their specific needs. Fundamental keys to success are to provide adequate structure for the program, to set measurable goals, to provide tools for the participants and to sustain management leadership. Given this foundation, almost anything will work. Save your money. Be very careful before jumping into the six sigma game. The better advice is to talk directly to peers who have been in it for 3 to 6 years and get the benefit of their experience. Read the books and take every sales pitch with a grain of salt. Six sigma consultants are getting hungrier by the day.
six sigma |
Cost Reduction & Profit Improvement
|
