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A Whitepaper from Juran

The Source for Breakthrough

Strategy

3 Ways Leanand Six SigmaWill CreateBreakthroughStrategy

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JuranOur expertise has been developed over more than six decades of real-world experience, and our methods are

universal and have been applied in nearly every industry and culture around the world. Our mission is to prepare a new generation of business leaders who will build greater prosperity for our society through the application of the operational excellence methods and values of Dr. Joseph M. Juran in the context of new

technologies, advanced applications, and expanding lessons learned. We want to be seen as trusted advisers, enabling global leaders to achieve measureable, breakthrough results.

2 3 Ways Lean and Six Sigma Can Create Breakthrough Strategy

Lean and Six Sigma are best known forhelping organizations pursue near-perfection levels of businessperformance. The disciplined andrigorous methodologies of Lean SixSigma can accelerate breakthroughs inquality, cost reduction, operationalspeed, customer satisfaction, andmore – whether a manufacturing orservice organization. In fact, a 2007report published in iSixSigmamagazine estimated that Fortune 500companies save $21 billion per year –or 2% of total revenue – through theirimprovement initiatives. The studyfound that 53% of Fortune 500companies use strategies like Lean SixSigma, and that figure rises to 82%when looking at the Fortune 100.

While reports like the iSixSigma studyare relatively commonplace, givingLean and Six Sigma the reputation ofbeing directly focused on the bottomline, what often goes overlooked is theimpact Lean and Six Sigma have ondeveloping and executingbreakthrough strategy in three areas:process innovation, processimprovement, and processmanagement.

Process Innovation

Key ingredients to achieving highperformance and sustaining acompetitive advantage are operationalspeed, quality, cost reduction, andcustomer satisfaction. Lean and SixSigma can impact process innovationin these areas by removing waste anddriving high-quality business processesin support of a company’s strategicpriorities.

Studies have shown that, regardless ofindustry, 30% to 50% of operatingcosts are pure waste. Using some basictools to eliminate this waste not onlyreduces costs, but also allows abusiness to become faster and muchmore responsive to its customers,driving revenue growth. In this regard,a solid improvement strategy canimpact process innovation by drivingbroad cultural change, creatinginternal capabilities required forcontinuous improvement, andestablishing a common language forbreakthrough improvement.

The essence of Lean is that anyexpenditure of resources for any goalother than the creation of value for theend consumer is wasteful – and, thus,should be eliminated. “Value” isanything the customer would bewilling to pay for. The ultimate goal isto provide perfect value to thecustomer through a perfect valuecreation process that has zero waste.

While Six Sigma also enablesorganizations to pursue perfection, thefocus is not on removing waste, butrather on using statistical and qualitymanagement methods to identifydefects and errors andminimizing variability in manufacturingand service business processes. SixSigma projects follow a series ofprescribed steps to achieve specificquantified targets, such as reducingbilling errors, manufacturing defects,or increasing customer satisfaction. Toachieve Six Sigma quality, a process

3 Ways Lean and Six SigmaWill Create Breakthrough Strategy

3 3 Ways Lean and Six Sigma Can Create Breakthrough Strategy

must produce no more than 3.4defects per million opportunities. An“opportunity” is defined as a chancefor nonconformance, or not meetingthe required customer specifications.This means that for a process to reachSix Sigma, it has to be nearly flawless.

Contemporary thinking related toimprovement is allowing companies tonot only improve operations, but alsoinnovate – rethinking the fundamentalsof how work gets done, how value iscreated, and how to best to meet andexceed the expectations of thecustomer. Regardless of the industry,country, or market, CEOs are searchingfor breakthrough products andservices, which often require majoroperational changes and fundamentalredesigns of their business models.

In 2006, IBM surveyed 765 corporateand government leaders worldwide aspart of its Global CEO Study. One keyfinding of that survey was that CEOssaid that their biggest barrier toinnovation was an “unsupportiveculture and climate.” In short, theseCEOs said their companies failed toengage in meaningful innovationbecause they lacked the processes,discipline, and organizational mindsetto create breakthrough improvementson a continuous basis.

Although Lean and Six Sigma arecommonly viewed as a performanceimprovement methodologies, theimpact they can have on processimprovement is extraordinary. Thefact-based analysis that is thefoundation of Lean Six Sigma, coupledwith its focus on direct customer input,provides a perfect catalyst for broad-scale innovation.

When broad-scale innovation is woveninto the cultural fabric of theorganization, creating breakthroughstrategy becomes not only easier, butalso more commonplace.

Process Improvement

There are a variety of ways toimplement process improvement, hereare two of the best known andsuccessful.

The focus of Lean is to improve speedand reduce inventory by removingwaste through a prescribed five-stepprocess:

1. Identifying customer value2. Mapping the value stream3. Creating flow4. Seeking perfection5. Pulling based on demand

The focus of Six Sigma is to reducedefects and variation through a similar,yet different five-step process:

1. Define (the problem)2. Measure (the problem)3. Analyze (root causes)4. Improve (the process)5. Control (the process)

Companies that adopt Lean look toreduce waste, which invariably meansreducing variation and processinefficiencies. Companies that adoptSix Sigma look to reduce defects andvariation, which ultimately reduceswaste. While they can be deployedindependently, Lean benefits from theroot cause analysis and culturechanging structure of Six Sigma, andSix Sigma benefits from the speed,waste elimination, and simplicity of

4 3 Ways Lean and Six Sigma Can Create Breakthrough Strategy

solutions found in Lean. Together, theyform a powerful continuous processimprovement methodology that cancreate sustainable breakthroughresults. However, to be effective indeploying an improvement strategy,companies must be aware of criticalsuccess factors.

Management Support:Management is critical to buildinga successful performanceimprovement organization,regardless of the methodologyadopted by the company. It ismanagement’s job to ensure thatthe right projects are selected, theright people are picked for projectteams, performance improvementmethodologies are followed,project roles and responsibilitiesare clearly defined, projects areappropriately communicated,education and training aresupported, and managementvisibly supports the project team.

The Right Projects: The success ofperformance improvementprograms is rooted in the projectsselected. Unfortunately, manyorganizations fail to developcriteria for project selection, whichresults in projects that provide noreal benefit to the organization. Ifemployees aren’t working on theright projects, it doesn’t matterhow well the projects are run – theresults just won’t make adifference. Thus, the “right”projects should be linked toorganizational strategies, haveidentifiable and quantifiable hardresults, and be realistic in scope.

The Right People: Being selectedto be on a performanceimprovement team should beviewed as an honor, not a chore.Because performanceimprovement projects aredesigned to achieve a sustainableimprovement in the organization’sperformance, projects are idealbreeding grounds for the nextgeneration of leaders. As such, the“right” people include thoseemployees who havedemonstrated leadership skills,problem-solving skills, and theability to make a difference in theorganization.

Adherence to Methodologies:Management must ensure that theimprovement methodology isadhered to and used effectively. Toallow project teams to shortcut theproven methodology only serves totell employees that themanagement team is sloppy in itsapproach to performanceimprovement.

Roles and Responsibilities: Beingclear about who is responsible forwhat is management’s job. This notonly includes the roles andresponsibilities of the members ofthe project team, but also thosewho play ad hoc roles.

Communications: Poorcommunications can quickly derailany project team. If the immediatesupervisors of the project’s teammembers do not understand the

5 3 Ways Lean and Six Sigma Can Create Breakthrough Strategy

organization’s priorities, then theycan become an obstacle inproviding the team members withthe time required to serveeffectively on the team. If projectteam members are not clear on theproject’s purpose, goals,boundaries, and expectations, thenthe project can quickly get off track– and stay there. And if staff is notaware of what projects are underway and why, then they’ll likelycome to resent their peers who areserving on teams, but only seem tobe gone much of the time.

Education and Training: To beeffective in deploying aperformance improvementstrategy, there must be aninvestment in education andtraining. To cobble together aninadequate training program notonly sends signals that theorganization is not committed toperformance improvement, but italso sets up everyone forfrustration, aggravation, andfailure.

Management Visibility: It isalarming how often we hear aboutexecutives who are named projectsponsors or champions, only torarely – if ever – show up formeetings, ask for updates, or showany real interest in the project atall. If you want performanceimprovement to be seen as astrategic imperative, then you musttreat it like a strategic imperative.An executive’s mere attendance ata project meeting tells everyonepresent that the project is of the

utmost importance and a highorganizational priority. Show a lackof management interest in theproject, and you will soon discoverthat the project team shows a lackof interest as well.

While deploying a performanceimprovement program is not for thefaint of heart – after all, there aremany barriers to overcome – theability to create breakthroughperformance improvement strategiesis unparalleled. Companies thateffectively adopt a solid approachhave been shown to hold acompetitive advantage in theirmarkets and corporate culture.

Process Management

Process management are the activitiesrelated to planning and monitoring theperformance of a process. The mostsuccessful companies use processmanagement to provide a strategicperspective into their key businessprocesses, which are a collection ofrelated, structured activities thatproduce a specific service or product.Most organizations have five to 10 keybusiness processes, which can includecritical business functions such assupply chain, revenue cycle, anddistribution. If any of these keybusiness processes were to fail, theresults to the company could becatastrophic.

Monitoring the performance of a keybusiness process is the work of process“owners” using key performanceindicators, or scorecards that keepmanagement apprised of the

6 3 Ways Lean and Six Sigma Can Create Breakthrough Strategy

effectiveness and efficiency of theprocess. Process management enablescompanies to keep one eye onoperations and the other onoperational strategy; it is only througheffective process management cancompanies determine where to devotestrategic operational resources.

Improvement, planning, and controlplay a large role in processmanagement, as each includes stepsand tools to plan, monitor, andimprove key business processes andtheir associated key performanceindicators. Many times, companiesseek to obtain a competitiveadvantage not by maintaining their keyperformance indicators at industry-accepted norms, but rather byleapfrogging the competition byimproving processes that are alreadyperforming well.

Whether innovating processes,improving processes, or managingprocesses, a solid improvementstrategy offers companies in allindustries a distinct competitiveadvantage.

How to Determine Where You Stand

The Juran Organizational HealthCheck (JOHC) analyzes internal andenvironmental factors critical to yoursuccess in today’s volatile marketplaceand compares them to performanceexcellence industry standards. You getmeaningful data on your organization’sstrengths and weaknesses that canhelp you close the gaps and achievesuperior quality and sustainableresults. With more than 1,000assessments completed, Juran has theexperience and insight that can helpjumpstart your journey to becoming aworld-class organization. The JOHCprovides a quick qualitative review – or“fitness test” – against industry bestpractices, with a summary of yourorganization’s ability to meet your ownplans and your customer needs.

To learn more about the JuranOrganizational Health Check or take aFREE Health Check, please visit ourwebsite at:

http://www.juran.com/organization-health-check

or contact us at:

Juran Global160 Main StreetSouthington, CT 06489800.338.7726info@juran.comhttp://www.juran.com/contact-us

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