A Powerful Strategy for Sustained Success

A Powerful Strategy for Sustained Success

THE MOST CHALLENGING question confronting business leaders and managers in the new millennium is not “How do we succeed?” It’s: “How do we stay successful?”

Business today offers the spectacle of a succession of companies, leaders, products, and even industries getting their “15 minutes of fame” and then fading away. Even corporate powerhouses—the IBMs, Fords, Apples, Kodaks, and many others—go through dramatic cycles of near-death and rebirth. It’s like riding the wheel of fortune as consumer tastes, technologies, financial conditions, and competitive playing fields change ever-more-quickly. In this high-risk environment, the clamor for ideas on how to get the edge, stop the wheel (while on top, of course), or anticipate the next change gets louder and louder. Hot new answers are almost as common as hot new companies.

Six Sigma can seem like another “hot new answer.” But looking closer, you’ll find there is a significant difference: Six Sigma is not a business fad tied to a single method or strategy, but rather a flexible system for improved business leadership and performance. It builds on many of the most important management ideas and best practices of the past century, creating a new formula for 21st-century business success. It’s not about theory, it’s about action. Evidence of the power of the Six Sigma Way is already visible in the huge gains tallied by some very high-profile companies and some not-so-high-profile ones, which we’ll examine in a moment. Just as important, though, is the role Six Sigma plays in building new structures and practices to support sustained success.

The goal of The Six Sigma Way is to enable you to understand what Six Sigma is (both a simple and a complex question), why it’s probably the best answer to improved business performance in years, and how to put it to work in the unique environment of your organization. In our mission to demystify Six Sigma for the executive and professional, we hope to show you that it’s just as much about a passion for serving customers and a drive for great new ideas as it is about statistics and number-crunching; that the value of Six Sigma applies just as much to marketing, service, human resources, finance, and sales as it does to manufacturing and engineering. In the end we hope to give you a clearer picture of how Six Sigma—the system—can dramatically raise your odds for staying successful, even as you watch other companies ride one wave of good times only to wipe out on the next. (Our first and last surfing analogy!)

Some Six Sigma Success Stories

Seeing the impact that Six Sigma is having on some leading companies sets the stage for understanding how it can impact your business. As we relate some of these results, we’ll also be reviewing the history that has brought Six Sigma to the forefront.

General Electric

Six Sigma has forever changed GE. Everyone—from the Six Sigma zealots emerging from their Black Belt tours, to the engineers, the auditors, and the scientists, to the senior leadership that will take this Company into the new millennium—is a true believer in Six Sigma, the way this Company now works.” —GE Chairman John F. Welch1

When a high-profile corporate leader* starts using words like “unbalanced” or “lunatics” in connection with the future of the com-

* Since launching GE’s effort in 1995, Jack Welch has urged his top lieutenants to become “passionate lunatics” about Six Sigma. He has described GE’s commitment to Six Sigma as “unbalanced.”

pany—you might expect a plunge in the company’s share price. At General Electric, however, that passion and drive behind Six Sigma have produced some very positive results.

The hard numbers behind GE’s Six Sigma initiative tell just part of the story. From an initial year or so of break-even efforts, the payoff has accelerated: $750 million by the end of 1998, a forecasted $1.5 billion by the end of 1999, and expectations of more billions down the road. Some Wall Street analysts have predicted $5 billion in gains from the effort, early in the decade. GE’s operating margins—for decades in the 10 percent range—continue to hit new records quarter after quarter. The numbers are now consistently above 15 percent, and even higher in some periods. GE leaders cite this margin expansion as the most visible evidence of the financial contribution made by Six Sigma.

Improvements from Services to Manufacturing

The financial “big picture,” though, is just a reflection of the many individual successes GE has achieved through its Six Sigma initiative. For example:

• A Six Sigma team at GE’s Lighting unit repaired problems in its billing to one of its top customers—Wal-Mart—cutting invoice defects and disputes by 98 percent, speeding payment, and creating better productivity for both companies.
• A group led by a staff attorney—a Six Sigma team leader—at one of GE Capital’s service businesses streamlined the contract review process, leading to faster completion of deals in other words, more responsive service to customers—and annual savings of $1 million.
• GE’s Power Systems group addressed a major irritant with its utility company customers, simply by developing a better understanding of their requirements and improving the documentation provided along with new power equipment. The result: Utilities can respond more effectively to their regulatory agencies, and both the utilities and GE have saved hundreds of thousands of dollars a year.
• The Medical Systems business—GEMS—used Six Sigma design techniques to create a breakthrough in medical scanning technology. Patients can now get a full-body scan in half a minute, versus three minutes or more with previous technology. Hospitals can increase their usage of the equipment and achieve a lower cost per scan, as well.
• GE Capital Mortgage analyzed the processes at one of its top performing branches and—expanding these “best practices” across its other 42 branches—improved the rate of a caller reaching a “live” GE person from 76 to 99 percent. Beyond the much greater convenience and responsiveness to customers, the improved process is translating into millions of dollars in new business.

The Actions behind the Results

GE’s successes are the result of a “passionate” commitment and effort. Notes Welch: “In nearly four decades with GE I have never seen a Company initiative move so willingly and so rapidly in pursuit of a big idea.”2 Tens of thousands of GE managers and associates have been trained in Six Sigma methods—a hefty investment in time and money (which is appropriately deducted from the gains cited earlier). The training has gone well beyond “Black Belts” and teams to include every manager and professional at GE—and many front-line people as well. They’ve instilled a new vocabulary revolving around customers, processes, and measurement.

While dollars and statistical tools seem to get the most publicity, the emphasis on customers is probably the most remarkable element of Six Sigma at GE. As Jack Welch explains it:

The best Six Sigma projects begin not inside the business but outside it, focused on answering the question—how can we make the customer more competitive? What is critical to the customer’s success? . . . One thing we have discovered with certainty is that anything we do that makes the customer more successful inevitably results in a financial return for us.