September 11, 2019

Six Sigma's Legacy: A Reframe through the Lens of Culture

Knowing part of my career was spent as the Six Sigma practice leader for a management consultancy, a college friend forwarded me this article: Whatever Happened to Six Sigma?

Much of the article is focused on the precipitous fall of General Electric. So at first, I thought the author was going to conflate the decreasing popularity of Six Sigma with GE's demise, which would have been a mistake. In the end, I agreed with many of the author's points.

But as I was reflecting about the article, I came to the belief that the business community is viewing Six Sigma's legacy in the wrong light. I will share some reactions to the article as a jumping off point for my proposed reframe.

Points Where I Disagreed with the Article

"But at organizations built around Six Sigma, he says, “disruptive innovation is discouraged.”

I don't believe that is true and I am not convinced the author does either. The term "disruptive innovation" is never even defined and besides, that's a broad-brush statement for which the author provides only tepid support (citing a study in the paint and photography industries on patent activity...hardly a mainstream industry, nor are patents an indication of disruptive innovation.)

In due course, there are two things almost every company needs to address: "offering" innovation and process efficiency. In-demand products/services, and the resulting high growth rate, cover a lot of sins including product defects, waste, and inefficiency. Similarly, a company might be in a competitive environment where growth at any cost is all that matters. Internal process improvement, productivity and waste reduction generally are not going to be much of a priority for companies focused on growth.

However, if that rapid growth has little to no margin, at some point, those companies are going to have to care about costs and efficiency and profitability. Cost-cutting and layoffs can only get you so far: processes will need to streamlined or automated, cycle times will have to be reduced, waste and defects and rework have to be addressed. In other words, they are going to need the tools in the Lean/Six Sigma tool box, no matter what someone decides to call them.

I don't think the author's claim is correct; companies can design breakthrough offerings and improve processes at the same time. GE certainly did it for years. So did Johnson & Johnson and many other companies I worked with.

At some point, those companies are going to have to care about costs and efficiency and profitability...[and] they are going to need the tools in the Lean/Six Sigma tool box, no matter what someone decides to call them.

My second point of disagreement is more around a degree of emphasis. The headline makes it seem like the article is going to present the coroner's cause of death findings for Six Sigma. And the author does indeed point to a number of things that might have been signals for an impending doom...how ill-defined Six Sigma is, that the there is no owner so implementations were all over the map, how it was mocked on GE's own 30 Rock. The author even points to the cliff-like decline after 2006 of books published with Six Sigma in the title, as well as a decline in people adding Six Sigma to their LinkedIn skill sets as more indications of Six Sigma's irrelevancy.

But buried in the article is mention of the fact that a university that charges $4500 for a 160-hour, non-accredited Six Sigma training program, trains 5-6000 students a year, and has never seen a drop off in program enrollment.

The reason of course is that there are plenty of places where the tools of Six Sigma are still very much in use. For example, if you are running a manufacturing operation, you can't possibly be successful without using control charts, running regression analysis to ferret out the relationship between potential causal variables and defects, mapping processes, and reducing waste.

Additionally, in the case of service businesses, the company's offering is often a process (e.g., Amazon fulfillment services, the loan/lease approval process for a Financial Services business). If that process takes too long or has too many errors or too much rework or the costs are too high, the company might not be able to compete effectively. Lean/Six Sigma will always have a place in businesses where a process/service is the offering.

And don't get me started about the ongoing need for Six Sigma in Call Centers. Or as an approach to improving call center outputs that actually works as opposed to the was, is, and always will be go-to improvement method in call centers, one-agent-at-a-time coaching, that is completely feckless and has nothing but negative ROI. Was that my outside voice?

In other words, asking what happened to Six Sigma, implying that it is dead like Elvis, seems like it might be another example of Mark Twain's: "The reports of my death are greatly exaggerated."

In other words, asking what happened to Six Sigma implying that it is dead like Elvis, seems like it might be another example of Mark Twain's: "The reports of my death are greatly exaggerated."

A Key Point Where I Agreed with the Article

I agreed with a number of points in the article, this one in particular: Six Sigma’s decline was also a symptom of a broader change in the corporate world, where innovation became more valued than efficiency, and technical precision was no longer a differentiator.

Here in Silicon Valley, Six Sigma has been dead for quite some time. Out here they are more growth focused, more product focused, more innovation focused, and more software focused. But it is also worth noting that the rules of business have also become unmoored in the start-up portions of the tech world: companies loosing money hand over fist are worth billions of dollars. (WeWork, Uber). Many of these companies are playing a different game than the one they teach in Business School.

It is this point about the broader shift towards towards innovation and growth that got me thinking about a reframe of Six Sigma's legacy.

‍‍Why Aren't People Talking about the Culture Change?

Companies that decided to introduce Six Sigma of course wanted to improve quality, get productivity increases, and serve customers better. Not to mention the fact that the potential for hundreds of millions in bottom line benefits that GE was banking every year were simply too hard to resist.

But many leaders quickly realized that Six Sigma was really a culture change effort. This was a way to imbue their companies with a continuous improvement mindset, where the use of data-based, analytical approaches to solving problems was the norm. The thinking went that if they could jumpstart this change, it could fuel ongoing improvements for years to come.

But many leaders I worked with quickly realized that Six Sigma was really a culture change effort. This was a way to really imbue their companies, for the first time, with a continuous improvement mindset and the tools to deliver, where the use of data-based, analytical approaches to solving problems was the norm. The thinking went that if they could jumpstart and sustain this change, it could fuel ongoing improvements for years to come.

Welch saw it this way. He trained and promoted leaders "who got it," so that this data driven, process improvement thinking became deeply woven into the fabric of leadership at all levels. And I think he got there. For other companies that took the Six Sigma plunge in earnest, it changed their cultures as well. I saw and felt it myself. The last decade at GE is, of course, a warning that culture change by itself is no panacea. Still, there is no denying that cultural changes took place.

Six Sigma was not the first culture change initiative. Companies have been attempting different types of culture change efforts for fifty years or more with varying levels of success: more customer focused, more service oriented, more innovative, more flexible, more quality.

But the Six Sigma implementations, were the first time a culture change effort 1) trained people in all functions and at all levels and in all types of companies in a particular philosophy and methodology, 2) trained leaders, not just on what it was, but on how to effectively lead their units with this approach to actually get results (in other words, as a management system), and 3) generated such undeniable ROI in company after company that pursued it.

Those three things in combination never happened with culture change efforts around previous management system innovations such as the Toyota Production System or the Shareholder Value ideology or Design Thinking. TQM in the early 80s did try #1 in manufacturing centric companies but they couldn't pull off #2 and #3 and so the efforts quickly faded with little to show for them.

Here is something nobody is talking about, but they should be: Six Sigma was also the first time such a comprehensive, relatively homogenous, culture change effort synchronously cut through such a large swath of Corporate America. And I don't think it is too much of a reach to say that because so many companies pursued Six Sigma, so hard, that the continuous improvement cultural shift extended itself beyond individual companies to become part of the broader business zeitgeist.

Here is something nobody is talking about, but they should be: Six Sigma was also the first time such a comprehensive, relatively homogenous, culture change effort synchronously cut through such a large swath of Corporate America.

"So what?" you say. Did anything become of those cultural shifts in individual companies and the broader business community?

One development from the early 2001, around the time Welch handed over the reins of GE to his successor Jeff Immelt, was the publication of the Manifesto for Agile software development which became fully codified as an approach around 2010.

Software developers long-resisted the application of Six Sigma to their work because they felt manufacturing-based process improvement tools just didn't apply; and they were probably right. But with all this process improvement going on, they also recognized that business-as-usual probably wasn't going to cut it, especially since there were widely acknowledged problems with how software was being developed.  Some approach to improving the dev process was needed.

Agile was the development community's response/solution to this frustration with their outputs, which were overly cumbersome and slow, involved constant rework, miscommunication with customers, bottlenecks, and wasted code. The Agile methodology...close to the business people and thus the customers with rapid release of more modular but functional software...tore through the software development community and is now found everywhere. It has even been expanded outside of software to the development products and solutions across a wide range of industries. (The methodology was further adapted as a guide to launching new companies, e.g., the Lean Start-up, though I find it interesting that, Lean and not Agile is in the title. But, like everything the Lean Start-up is getting blowback too.)

With the Six Sigma tide rolling out, you would have thought leaders would have gleefully stood on shore and waving adios to all those mind-numbing statistics.  Just the opposite happened.  Instead of Gage R&R and Chi-Square analyses, we now have Decision Trees, Bayesian Networks, Markov chains and matrices, and even black-box Machine Learning proliferating in companies like fruit flies.  If companies weren't still obsessing about data-driven, continuous improvement, why'd they double down?

It is worth noting that while these tools, shiny and new though they seem, are based on the same fundamental concepts that those boring old Six Sigma statistics were based on: meticulous data collection, clean data sets, analysis using regression and other variance partitioning approaches...all with the objective to find meaningful patterns, relationships, and predictors that can be mined for improvement.  

All those Geico ads on TV that make you want to claw your eyes out? While they may be annoying, I can almost guarantee they are part of exceedingly complex experimental design arrays that are producing impressive ROIs..

So rather than getting away from it, companies basically swapped one set of statistical tools for another.  But the focus of these new statistical tools definitely has changed. Instead of analytics being applied to internal processes, errors, waste and inefficiency, the new analytical methods are largely being applied to areas like stratifying customers, modeling customer decision making, risk reduction, click-through rates, advertising effectiveness, customer success and retention, etc.

In other words, as the article said, the focus is decidedly more focused on customer acquisition, loyalty, innovation, and revenue growth than on the improvement of intra-and interdepartmental processes and efficiency.

And that shift in focus has not only taken hold rapidly, it has also been astonishingly successful.  For decades, there was a joke in Marketing circles: "Half of our advertising spend is effective. We just don't know which half." Those days are long gone.

Today, with all the A/B testing on websites and sophisticated cross-market Design of Experiments (DoEs) on all forms of advertising, Marketing departments absolutely know what is working and what is not and are constantly experimenting to optimize response rates, acquisition, retention, order size, and customer success. All those Geico ads on TV that make you want to claw your eyes out? While they may be annoying, I can almost guarantee they are part of exceedingly complex experimental design arrays that are producing impressive ROIs.

The seeds of that new orientation within dev and marketing...1) continuous optimization, 2) based on data vs opinion, and 3) backed by analytical and statistical rigor...were planted in the course of all those Six Sigma implementations.

So, Six Sigma as a management system with Black, Green, and Yellow Belts and and certifications and project review committees? Yes, while it is not completely gone, it is certainly much less popular.

However, the tools of Six Sigma are as relevant as ever, and you know what? They always will be. They are in use inside companies where they are most appropriate. Moreover, there are plenty of companies that are leaving upside on the table because they are not using them more.

And that rapid and dramatic progress on the product innovation, customer acquisition, and revenue generation fronts that we have observed for fifteen years and still see today...do you think that was an accident? I don't.

The seeds of that new orientation within dev and marketing...1) continuous optimization, 2) based on data vs opinion, and 3) backed by analytical and statistical rigor...were planted in the course of all those Six Sigma implementations.













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