Overview - Six Sigma: Creating a Competitive Advantage

Aline Young

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What is Six Sigma?

Six Sigma is a business philosophy that among other things states:

"We are in business to make money, we make money by satisfying needs, we are able to satisfy needs by doing, every need/do pair is an interaction"1

Six Sigma is a highly disciplined process that helps companies focus on developing and delivering near-perfect products and services. Why "Sigma"? The word is a statistical term that measures how far a given process deviates from perfection. The central idea behind Six Sigma is that if you can measure how many "defects" you have in a process, you can systematically figure out how to eliminate them and get as close to "zero defects" as possible.

Businesses often measure their performance inside out based on average or mean-based measures of the recent past. Customers, however, don't judge businesses on averages. Six Sigma focuses first on reducing process variation and then on improving the process capability. General Electric, one of the pioneers of Six Sigma, recognized that customer's value consistent, predictable business processes that deliver world-class levels of quality. This is what six sigma strives to produce.

Six Sigma can now imply a whole culture of strategies, tools, and statistical methodologies to improve the bottom line of companies. In all, six sigma is a rigorous analytical process for anticipating and solving problems. The objective of six sigma is to improve profits through defect reduction, yield improvement, improved consumer satisfaction and best-in-class product / process performance.

Why is Six Sigma important?

Excellent companies typically operate at about 4 sigma or 99% perfection. To get to the six-sigma level means cutting down on huge costs and thereby the wasted dollars. For example, if you were four sigma - you would be producing products at the rate of 6200 defectives for every million you produce vs. 3.4 defectives if you are at the six-sigma level. Moreover, six sigma improvement projects typically return in excess of $150k to $250k per project with a Black Belt returning as much as $1 million to the bottom line each year.

The fundamental objective of this approach is a measurement-based strategy that focuses on improving business processes and reducing variation. These efforts are often implemented in a series of projects targeted at specific business processes. While early efforts have concentrated on manufacturing shop floor using Design, Measure, Analyze, Improve, Control (DMAIC) prioritizing projects based on cost savings targets, recently there is a growing realization that when you add Design for Six Sigma (DFSS) it is applicable in every area of the business.

The reason for instituting consumer oriented six-sigma goes beyond just the dollars. Six-sigma projects change the very dynamics of the ways things get done and provide a significant competitive boost to the company or product. Through constant application of the six-sigma principles companies move beyond routine problem solving towards more proactive needs analysis in order to develop and deliver superior products and services. Six sigma means overall excellence.

The popularity of Six Sigma is growing. Companies such as Motorola (1987), Texas Instruments (1988), IBM (1990), Asea Brown Boveri (1993), Allied Signal/Kodak (1994), GE (1995), Whirlpool, PACCAR, Invensys, & Polaroid (1996/98), and many other companies worldwide have successfully implemented Six Sigma. More recently Ford, DuPont, Dow Chemical, Microsoft and American Express have started working on instituting Six Sigma processes.

Implementing Six Sigma

mplementation requires a top down approach, and strict adherence to the tools templates and methods selected. While six-sigma program implementation need not require any significant capital expenditure (other than for training), it does warrant a long-term vision, management commitment and commensurate attention and resources. Firms also need to invest in training designated staff in the appropriate methods, tools and techniques, and then enabling them to manage the program and guide improvement projects. These people, particularly those now commonly referred to as master black belts, black belts and green belts, are the core of the six-sigma program.

Figure 1. The Breakthrough Roadmap, Six Sigma Academy, Inc.