Lean Six Sigma Lesson #1 - Laser Focus

Jay Arthur
888-468-1537
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KnowWare International, Inc.
DBA LifeStar
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Denver, CO 80224

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In This Issue

• Avoid Becoming a Six Sigma Casualty
• A Tale of Two Factories
• Create a Master Improvement Story
• The Balanced Scorecard
• Laser Focus using a Few Key Tools
• Telecom Example
• Set a BHAG
• Avoid the Common Pitfalls

Avoid Becoming a Six Sigma Casualty

I often hear horror stories from companies that started lots of teams, let them choose their own problems to solve, and waited patiently for the money to start rolling in. Months pass; years pass. Teams become frustrated. "Six Sigma doesn't work!" they cry. Don't let this happen to you!

The first key to Six Sigma success involves laser-focus of every improvement team you start.

A Tale of Two Factories

Every company has two factories:

The Main Factory that markets, sells, invoices, and delivers your product or service. This factory uses the formula:

Quality + Speed = Profit

The Fix-it Factory that corrects all of the mistakes in the Main Factory. There's always an "overt" Fix-it factory where you measure defects and delay, and there's a hidden Fix-it factory that corrects things without anyone ever knowing. The Fix-it factory uses the formula:

Defects + Delay = Lost Profit

The Fix-it factory may consume 25-40% of every dollar spent, money that could be used to grow a business or improve profits.

Create a Master Improvement Story

The first step is to create a master improvement story that focuses on the Fix-it Factory. The master improvement story answers the question "What's Important?" It identifies the key areas for improvement, measurements, targets, and the effects of those improvements. The best tool for documenting this is the tree diagram. You'll find two versions in the QI Macros SPC Software for Excel: 1) a basic tree and 2) a "balanced scorecard." Here is an example of the balanced scorecard tree.

The Balanced Scorecard

The "balanced scorecard" approach uses four key areas to help organize the improvement story. They are:

1. Financial Growth
2. Customer Satisfaction
3. Learning and Growth
4. Quality

Financial growth and customer satisfaction are effects of providing better quality products faster at a lower cost and higher perceived value. Learning and growth focus on employee skill development and the availability of information systems to support learning. Quality focuses on breakthrough improvements in cycle time, defects, and cost.

You can view examples of various measurements for service, manufacturing, healthcare, or IT on our website at http://www.qimacros.com/scorecard.html. If you are struggling to determine what your key measurements are or what chart to use to track them we can help you via our phone, email or onsite coaching services. See Lean Six Sigma coaching at http://www.qimacros.com/consultform.html.

Laser-Focus Using a Few Key Tools

After you have determined "What's Important?" the next question is "What's Broken?" To succeed at Six Sigma, laser-focus every team you start. This means that leadership will want to work with an improvement expert to develop the first few elements of a successful improvement story:

1. Line graph showing defects (preferably in parts per million) or delay over a period of time. This answers the questions: "Where are the defects? Where are the delays?"

   

2. Pareto chart(s) showing 1, 2, or 3 "big bars" that contribute 50-60% of the problem identified in the line graph. This answers the question "Where's the Mother Lode?" Use the 4-50 Rule: 4% of any business creates over half of the waste and rework. Find it and fix it.

   

3. Write a Good Problem Statement. Use the first big bar on the pareto chart to write your problem statement. A sample problem statement is: During the first 6 months of 2006, time code errors accounted for 47% of the incorrect paychecks, which was 2 times higher than the next highest contributor and resulted in 78 employee complaints.
4. Cost of Quality Analysis showing how much this portion of the Fix-it Factory costs and what the benefits will be. These four steps should take no more than 3-5 days using existing data. Each of these charts and worksheets are available in the QI Macros SPC Software for Excel. Download a 30 day evaluation copy

Time: It rarely takes more than 2-3 days to analyze all of a company’s data and develop a master improvement story that identifies the 4% of the business causing over 50% of the waste and rework. If you have teams that have been meeting for weeks or even months, check their problem statement. If you need help getting these teams focused or coming up with actionable problem statements consider our Jump-Start Coaching.

Telecom Example

One wireless company I worked with had an order error rate of 17% in their service order system. Their target: 9% in 12 months. Only 6 error types out of 200 accounted for 90% of the total errors (4-50 rule). Six different teams met for a half a day on each of the 6 error types. It took 4 months to implement the software changes, and they ELIMINATED 5 of the 6 and cut the last one in half. The order error rate dropped below 3%. Not bad for 10 days of focused root cause analysis. A before and after pareto chart should look like this.

Set a BHAG

Once you've identified your area for improvement, set a Big Hairy Audacious Goal (BHAG). Forget about incremental improvements. Go for 50% reductions in cycle time, defects, costs, system downtime and so on. Go for 50% improvements in financial results and customer satisfaction.

I have found that when you go for 10% improvements, you only get incremental ideas. When you go for 50% improvements, you get 50% or bigger ideas, and you often get 70-80% improvements. Breakthroughs!

One CIO set a target for a 50% reduction in computer system downtime; he assigned just one "black belt" and several laser-focused teams that exceeded his BHAG in just six months. BHAGs also force you to narrow your focus to the 4% of the business that will produce the big return on investment.

Avoid the Common Pitfalls

Pitfall #1: Starting a team when you have no data (line graph and pareto chart minimum) indicates you have a problem that can't be solved using Six Sigma. Without data to guide you, you don't know who should be on the team, so you end up with diverse groups of people trying to solve too many different problems. Never start a team that doesn't have a good chance of succeeding. You'll just waste their time and threaten the survival of Six Sigma.

Solution: Set the team up for success. 1) Work with data you already have; don't start a team to collect a bunch of new data. 2) Refine the problem before you let a group of people get in a room to analyze root causes. You can guarantee a team's success by laser focusing the problem to be solved. If you want to ensure you have a good problem statement before launching a team, send us your data and we can provide coaching at various levels to get you on your way.

Pitfall #2: Endless Data Gathering. Never start by collecting a bunch of new data. This is just a way of avoiding getting started on real changes. And unless your business is completely ignorant of day-to-day operations and problems, you already have enough data to work with. If a leader working with an improvement expert can't get to this level of specificity, neither can a team!

Solution: Use existing data and just get on with it.

Pitfall #3: Flowcharting a process. I know it sounds sacrilegious, but flowcharting a process at this stage of an improvement effort only serves to make it harder to change later. Once a team spends hours figuring out the current flow, they have essentially drawn a box around their problem solving imaginations. Any and all ideas will be filtered through "the way we do it now."

Solution: Keep team members open to new ideas and possibilities. Start with a problem to be fixed not a process to be changed.

Special Bonus: Listen to our 35 minute Six Sigma overview at your own convenience. Just go to http://www.qimacros.com/teleclass.html. If video training or self-study are more your style, consider the Complete Six Sigma Simplified System (item #290).

In Lesson #2 we will discuss how to Double Your Quality and Slash Your Costs.

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