"Making Six Sigma Last"

William Parr

Six Sigma Forum Magazine

February 2006, pp. 15-19

The author of this article categorizes the elements he feels are often missing from Six Sigma training into three major groups:

• Technical but not Statistical
  • Financial Analysis: This involves "the ability to do a precise and careful analysis of a project using the concepts of net present value (NPV) and internal rate of return (IRR)."
  • Theory of Constraints: "The thinking processes developed by Eliyahu Goldratt are superb and should be a part of the portfolio of every BB [Black Belt] and GB [Green Belt]."
  • Lean: "There has been a trend in recent years to include more concepts and tools of Lean in the training of Black Belts and Green Belts, but there are still cases where Lean and Six Sigma compete for resources or are not integrated well."
  • Simulation: "Simulation can be a powerful tool for exploring the consequences of changes in line design."
• Nontechnical
  • The Soft Side of Change Management: Though Six Sigma training courses often cover such topics, failure to manage this aspect is still a major source of project failure.
  • Performance Based Management: "Good measurement system content and properly aligned objectives and behaviors to those systems is critical."
  • Customer Satisfaction Measurement: "Familiarity with state-of-the art methods for measuring customer satisfaction should be a requirement for BBs."
  • Selection and Management of BBs: The skills and personality mixes needed should be considered in selection, and career-tracking and mentoring are important aspects of BB management.
  • Broader Criteria for Project Selection: There has been too much emphasis on cost-cutting projects and not enough emphasis on longer-term projects related to strategic business objectives.
  • Design for Six Sigma (DFSS): The author proposes that as Six Sigma becomes more mature in an organization, the emphasis on DFSS should also grow. Therefore, Black Belts need some familiarity with DFSS in their training.
• Statistical
  • Core Concepts of Reliability
  • Data Mining
  • Sample Surveys
  • Forecasting
  • Use of Graphical Methods to Present Statistical Data

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"How to Prevent Your Customers from Failing"

Stephen Tax, Mark Colgate, and David Bowen

MIT Sloan Management Review

Spring 2006, pp. 30-38

It is estimated that customers cause about one-third of all service problems. The authors of this article define a customer failure as "any action by the customer that has negative impact on that customer's experience, the experience of other customers or the company's productivity."

In-depth interviews were conducted in 52 organizations and with 60 customers. It was discovered that companies have much less-developed processes in place to deal with customer failures, as opposed to dealing with the company's own service failures.

A three-step framework is proposed for preventing customer failures:

Collect Diagnostic Data on Customer Failure Points—The article provides a very useful list of diagnostic questions to ask of Senior Managers, of Line Managers and Middle Managers, of front-line employees, and of current customers and lost customers.

Identify Root Causes of Customer Failure—The underlying causes of customer failure generally fall under the categories of People (customer lack of skills; customer attitude and effort; poor fit between the customer and the service; failure to communicate important information to the service provider; and unclear employee and customer roles), Processes (complex processes; lack of information to clarify procedures; customer-unfriendly overall design); Servicescape, which is the physical environment that customers encounter at the service site (ambient conditions; spacing and functionality; physical tools such as signs and symbols); and Technology (difficult to use; poorly designed; nonfunctional; inaccessible; poorly-supported).

Establish Preventive Solutions—A combination of the following aspects is necessary:

• Redesign processes
• Implement technological solutions
• Manage customer behavior
• Encourage customer "citizenship" and mutual support
• Improve the servicescape

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"Sustainability and 'Lean Operations'"

H. Thomas Johnson

Cost Management

March/April 2006, pp. 40-45

The author of this article states that "Those who study business sustainability miss a unique opportunity by ignoring Toyota, not because Toyota is a paragon of sustainability but because key features of its current operating system will likely be emulated by any company that might become truly sustainable in the future.

The article argues that the only truly sustainable system we know is the system of all living systems on Earth. To emulate this system, three principles must be followed:

• Everything that exists is related, ultimately, to everything else that exists
• Everything that exists is self-organizing
• Constant interaction among all self-organizing entities produces a continual unfolding of more diversity and complexity

The author argues that Toyota views operations in similar ways to these three principles. In addition, Toyota manages to achieve competitive costs at almost any scale of operations. Companies that try to understand the deep elements of Toyota's approach would be able to operate at smaller scale and in local regions. This in turn, could help reduce the current waste of excessive and complex accounting controls: "as in Toyota, all the information needed would be contained in the work and the work would be the primary source of information about results and consequences."

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"Your Loyalty Program is Betraying You"

Joseph Nunes and Xavier Dreze

Harvard Business Review

April 2006, pp. 124-131

In recent years, many organizations have gotten rid of their customer loyalty programs. This article says that there are five realistic loyalty program goals:

• Keep customers from defecting
• Win greater share of wallet
• Prompt customers to make additional purchases
• Yield insight into customer behavior and preferences
• Turn a profit (in conjunction with partner programs with other organizations)

The following Levers of Loyalty are identified:

• Divisibility of rewards—"the number of discrete reward redemption opportunities a program provides"
• Sense of momentum—customers need to feel they are making progress towards their goal
• Nature of rewards—"the most successful loyalty programs often feature less functional and more pleasure-providing rewards"
• Expansion of relationship—rewards should give the customer experiences that expand their repertoire of possible purchases
• Combined-currency flexibility—points can be redeemed for a reduction in currency cost to make a purchase

The following Mistakes to Avoid are discussed in the article

• Don't create a new commodity
• Don't reward the disloyal
• Don't reward volume over profitability of individual customers
• Don't give away the store
• Don't promise what you cannot deliver

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"The Toyota Product Development System: Integrating People, Process, and Technology"

James Morgan and Jeffrey Liker

New York: Productivity Press, 2006

This book makes a major new contribution to our understanding of Toyota's success. Though the Toyota Production System has received a lot of attention as the prototype for Lean Manufacturing, the Toyota Product Development System has been relatively poorly explained in the literature. Toyota has excelled in new product quality in the J. D. Powers Initial Quality Surveys.

Starting from the three subsystems (process, people, and technology), of the Sociotechnical Systems approach, the authors identify 13 principles of the Lean Product Development system:

Under the process subsystem (defined as "all the tasks and the sequence of tasks required to bring a product from concept to start of production"), the principles are (1) Establish Customer-Defined Value to Separate Value-Added Activity from Waste; (2) Front-load the Product Development Process While There is Maximum Design Space to Explore Alternative Solutions Thoroughly; (3) Create a Leveled Product Development Flow; and (4) Use Rigorous Standardization to Reduce Variation and Create Flexibility and Predictable Outcomes.

Under the people subsystem (which includes "recruiting, selecting, and training engineers, leadership style, and organizational structure and learning patterns"), the principles are: (5) Develop a Chief Engineer System to Integrate Development from Start to Finish; (6) Organize to Balance functional Expertise and Cross-Functional Integration; (7) Develop Towering Technical Competence in All Engineers; (8) Fully Integrate Suppliers into the Product Development System; (9) Build in Learning and Continuous Improvement; and (10) Build a Culture to Support Excellence and Relentless Improvement.

Under the tools and technology subsystem (which includes CAD systems, machine technology, digital manufacturing and testing technologies, and the "soft" tools that support the people in the development project), the principles are: (11) Adapt Technology to Fit Your People and Processes; (12) Align Your Organization Through simple, Visual Communication; and (13) Use Powerful Tools for Standardization and Organizational Learning.

The book dedicates a full chapter to each of the above principles. There are also chapters on Putting the Pieces Together into a Coherent System; Eliminating Waste in the Product Development Value Stream; and Getting to Culture Change—the Heart of Lean Product Development.

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Lies, Damnable Lies and Statistics

John McNeil, GP Deltapoint
 

William Parr lists key elements missing from Six Sigma training and implementation. Of course there are reasons these shortcomings persist in modern organizations and these root cause reasons must be attacked before his prescription can be taken. Many of these reasons are rooted in well-intentioned efforts to enhance the truth for our customers, but some more insidious ones are rooted in our willingness to kid ourselves. In many cases, these barriers to success can be overcome by using the simple but powerful admonition "show me the data", but so many of us lack the tools or confidence to be able to measure the data and make sense of it. Parr addresses this point in his third area, but some key points remain unsaid.

First let's address fooling our customers. Most organizations have established products or services to sell or promote. We would like our customers to like our products or services. We are hammers looking for nails. But Tax, Colgate and Bowen show us one of the many reasons that truly understanding our customers' needs is frustrating and difficult. Often the customers know nothing more than to ask for the same standard solutions as before. So we oblige and the market swings from one surge of similar products to the next; one flavor of the month to the next. Overcoming this tendency requires Toyota's steadfastness of purpose and adherence to "Towering Technical Competence".

More insidious is our tendency to fool ourselves. We would like our bosses to like us and so we strive to make our numbers look good, and our measures to, well, measure up. We focus on averages in our key measures, attributing swings to our competence rather than common causes in variation. We gather high-level data monthly and look for trends when we should be gathering low level data daily and looking for tightness to purpose.

A key point to make is that variability is the enemy of meeting customer needs efficiently. We should measure variability and drive it down relentlessly. Another key point is that improvement in common-cause variation will only come from intelligent experimentation. Some lucky few of us have the gift of seeing the forest instead of the trees and of knowing exactly what to do to fix a car, a business process or a dysfunctional team. The rest of us should learn to love and embrace fundamental statistical methods. See you in black belt class.

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