In 1980s America, as Reagan strived to bring an end to the Cold War while ET phoned home, a management tool was born that completely revolutionised the way executives from all over the world ran their businesses. Now celebrating its 20th anniversary, Six Sigma (as it became known) continues to be the strategy of choice among market leaders across a multitude of sectors and is slowly but surely establishing itself in the Middle East.
But with so many other management tools now at your disposal and development capital within companies as scarce as ever, is the school of thought still relevant to your business and still worth investing in?
According to Hassan Tavakoli, vice president of Motorola in the Middle East and Africa, “everyone should use Six Sigma, it is a simple methodology that helps improve the quality of your products, reduce costs and reduce cycle time.” And, having played a major role in the development of Six Sigma, Tavakoli certainly knows a thing or two about the system.
“It all started in 1986 in a Motorola meeting near Chicago,” he recalls. “Everybody in the company was making statements about how great we were and how a fantastic year was about to start.
Then one of our officers stood up in front of 500 people and said ‘our product quality sucks. Lets not fool ourselves in terms of the quality of our products we have issues’, and that was the beginning of a change in the way our company was run.” The company then applied a new statistical management system to its manufacturing department to measure and reduce the number of defects made during the manufacturing process.
Three years later, Tavakoli applied the same quality control method to Motorola’s finance department, helping to significantly shorten the cycle time between the end of a quarter, and the release of the company’s results. In the years that followed, Six Sigma was developed into a widely accepted system that is reported to have saved Motorola over US $17 billion to date and has been adopted by businesses the world over, including General Electric, AXA Insurance and Honeywell International.
In simple terms, Six Sigma is a data-driven measure of quality that aims to bring continual improvement to a particular business process.
Since Sigma measures how far a process deviates from perfection, statistics are used to show how a process is performing and, to achieve Six Sigma, it must not produce more than 3.4 defects per million opportunities.
An opportunity is defined as a chance for non-conformance or not meeting the required specifications or demands of the customer. Most Six Sigma models are built around the ‘DMAIC’ process of Defining what is important in a particular process, Measuring its performance, Analysing what is going wrong, Improving the performance and then striving to guarantee consistent quality by Controlling the performance.
“In this continuous process, you attempt to eliminate opportunities that defects could occur by shortening the cycle each time you go through the DMAIC cycle,” explains Tavakoli. “The cycle should become smaller and smaller with less steps taken in every process resulting in less opportunities for defects or errors to occur, bringing a more efficient approach from A to Z”. Six Sigma expertise is measured in martial arts-style coloured ‘belts’ with beginners rated as white belts while those classified as full-time trainers are awarded master black belt status.
While the ideology of the system may sound appealing in theory however, what are the actual advantages of Six Sigma to your business? For Andrea Rossi, CEO of AXA Insurance Gulf and a Six Sigma master black belt, the beauty of Six Sigma is that it enables you to tune directly into the demands of your customers. “The problem with most organisations is that they are organised functionally and so everyone works in silence. A customer isn’t organised functionally and so when they interact with the company, they cut across the organisation, across three or four functions and that’s where the real issue is — you have to ensure that every time the customer interacts, they get the same level of service,” he says.
“This is why Six Sigma is so strong because it allows you to map down all your processes, link them to your customer requirements, see the business overall and realign your business to the most important thing, its customers.”
Rossi also believes Six Sigma is a far superior method of problem solving than what he calls “fire-fighting”. “Whatever industry you’re in, we have a tendency of fire-fighting, or jumping to solutions to fix something in the moment, in the short-term but it doesn’t usually stick, so you are doing something with no added value at all.” With Six Sigma, by moving through the DMAIC process, Rossi claims you can establish carefully thought out, long-term solutions to company defects both large and small.
Of course, most chief executives wouldn’t even consider bringing in a new management system without the promise of saving money. According to Tavakoli however, this is something easily achieved with Six Sigma deployment. “A product launch may cost US $100 million, so how can we take 10% off that?” he says. “This could definitely become a Six Sigma project, as long as you define where you are and where you want to be, and strive for continual quality improvement.”
Admittedly, as with any business strategy, there are arguments against adopting a Six Sigma methodology. Some chief executives we spoke to in recent weeks dismissed it as a tool that clouds the fact that running a business is about people, not statistics.
Rossi highlights other often-voiced misconceptions such as the view that Six Sigma should only be applied to the manufacturing industry because it is “statistical, involves measuring and talks about yields”.
There is also the fact that, as Six Sigma cuts across the entire corporation, it can take away authority from senior level management which can lead to disapproval from the CEO or the executive committee. With master black belt consultants commanding a fairly competitive salary, there is also the issue of having to shell out significant amounts of capital on two or three new employees, or on staff training, without witnessing immediate results.
Although Tavakoli admits that Six Sigma is nowhere near as popular in the Middle East as it is in Europe and North America, his own Motorola University (in Dubai) is attracting businesses from across the region to its Six Sigma training courses. Tavakoli also claims a number of local government agencies are showing an interest in the management school of thought.
As well as Motorola University, there are a number of consultancy groups offering Six Sigma training in the region, including Wipro — a global provider of technology-driven business solutions. According to Sathish Chandran, a senior Six Sigma consultant for Wipro, there are a number of things to be wary of if you are considering applying a Six Sigma strategy. Chandran believes companies should rule out the application of the methodology if:
1. You are a start-up company as you will still be dealing with teething issues and increasing your company headcount.
2. There is instability or random behaviour in your business, such as sudden failures, as you do not have total control over the company.
3. If you don’t have the resources to bring two or three full-time Six Sigma master black belt trainers into your corporate structure.
The key to successful Six Sigma is that the chief executive and the board are passionate and committed to its success, according to Rossi. “Of all the companies that apply Six Sigma, probably only about 20% are successful. The reason for failure is because of a lack of leadership commitment — CEOs and executive committees don’t believe in it,” he says.
“When I worked for GE, Jack Welch (formal global CEO) would spend 55 minutes of a one-hour meeting talking about Six Sigma.” Rossi highlights the importance of selecting a respected company member who is “second in command to the chief executive” to embark on Six Sigma training and ultimately lead its implementation across the business. Describing the
methodology as “a full proof tool”, Tavakoli — one of the founding fathers of Six Sigma — asks the question “can you afford not to adopt it?”
But while the many benefits of the quality improvement method are obvious, adopting the strategy is not a move to be taken lightly.
For every successful global enterprise like GE or Motorola, there is a company that has sacrificed vast amounts of resources on training and development, only to fail in its quest for continual improvement due to a lack of commitment or drive.
Consider what the methodology could do for your business and maybe you could join the never ending quest for quality improvement.