Customer Thinking: Specs & Dashboards

A Six Sigma company has to go beyond asking customers whether they are satisfied. To determine the number of defects being produced, you need a specification to which you can compare your performance. When a Six Sigma company talks to its customers, it won’t just restate that the customer wants “better service” or is concerned about delivery problems. It must continue the conversation until it determines that what the customer really expects are complete orders at least 98 percent of the time and deliveries three times a week at 3:00 p.m. ±1 hour. Now the company has a spec that it can compare its performance against to determine a DPM. Imagine having this level of specificity and data for all the primary elements of your key customers’ value propositions arranged in a dashboard. This would allow you to have a much different conversation with your customers at the end of the month/quarter/year than in the past. With specs and dashboards, you can start the conversation with: “This is how we are doing against what you told us is important to you. Here is where we have improved and here is where we still have work to do.” It is a conversation based on facts and complete data, not just one or two vignettes. It also vividly demonstrates how intent you are about addressing your customer’s needs. Moreover, fact-based conversations about changes in performance lead quite naturally to the quid pro quo: “If we can consistently meet these product/service specifications, would you be willing to give us more of your business?” Even with no 3.4 DPM necessarily in sight, pursuing Six Sigma has lead to a completely different form of customer interaction.

Statistical Thinking: Variation

Becoming a Six Sigma organization means embracing the fundamentals of statistical thinking: · All outcomes are produced through a series of interconnected processes · All processes vary · The keys to success are understanding and reducing variation Many organizations have embraced process thinking, but few understand the significance of variation. This means they are at a distinct disadvantage in the race to get better and improve service to customers. Most organizations report and manage averages. But averages are an abstraction and are often misleading. This is especially true when averages are used to represent the customer experience. Customers don‘t experience your average—they experience your variability. For example, consider three customers’ experiences shown in Figure 1. The histogram displays three months of data on the percentage of the total order actually delivered to customers. How well does a three-month average of 94.5 percent describe what these three customers experienced over the last quarter? If you told Customer C, for example, that your average was 95 percent would Customer C care? Many companies, with a high average performance along some dimension, are surprised at the diversity of customer survey responses about their performance. If the amount of variability shown in Figure 1 underlies their high average, should they be surprised? Understanding the importance of variation gives Six Sigma companies another avenue for improving. They move their averages by understanding and reducing the variation of processes that affect customers.

Causal Thinking & Leading Indicators

A third kind of thinking that permeates Six Sigma organizations is causal thinking. This is often expressed as y =f (x1, x2, x3….. xn). “y” is some outcome you care about. “f” is read “is a function of’ and the x1, x2, Six Sigma Imperceptibles Arthur G. Davis, Principal, The Davis Group 2 Six Sigma Imperceptibles continued from Page 1 To give you a sense of the improvement, a Three-Sigma golfer, playing 100 rounds of golf per year, would miss one putt per round. A Six-Sigma golfer would miss one putt every 163 years. x n are the key factors that influence the outcome you are trying to drive. When people start to view the world in this fashion, they start to think, “If I want y to move, I have to move x1, x2, x3 ... xn. I wonder what drives x1, x2, x3 ... xn?” For example, suppose you are trying to reduce the cycle time for credit approvals. Let’s say the credit approval process consists of four steps: submission, keying, decision and notification. The overall cycle time is obviously a function of the cycle time of each step. The cycle time of each sub-step would be a function of other variables such as resource availability, number of steps, wait queues, method of transmission/ notification, amount of missing information on the application form etc. How do you begin to identify the key Xs? The first step is to make the invisible variation visible. This means making pictures of the variation, as in Figure 1. Pictures, more than monthly reports, lead people to generate hypotheses, which are the precursors of identifying and fixing the key Xs. Consider Figure 1. Immediately questions arise: Why is there so much variation in this process? What types of customers/ products/orders are out in the tail? Why is the first mode at 95 percent, not 98? Why is there a second mode in the low 80s’? Is there a “process within the process”? Pictures lead to questions and hypotheses, to which Six Stigma’s broad array of statistical and Design of Experiment tools can be applied to help definitively identify the key Xs. Once the key Xs have been identified, they become leading indicators or early warning systems for the performance of the Ys (i.e., outcomes) you are trying to improve. By attending to leading indicators, you can head off problems before they affect customers or adversely impact financial performance. This is the beginning of an internal business dashboard (that augments the customer dashboard described previously). These dashboards are displayed and discussed in open forums and show, in no uncertain terms, whether you’re getting better. Even if you never achieved 3.4 DPM, what would it mean to have employees in your company thinking about causes, generating hypotheses, tracking leading performance indicators to head off problems before they reach customers, with measures posted prominently so you can tell if you’re improving or not?

Common Language and Accelerated Learning

Today’s global businesses operate across a diverse range of geographies and cultures, offering a wide range of products and services from different business units. How does the whole become more than the sum of the parts? How does a management team create a quilt from separate pieces of cloth? One way is with a shared set of values. Though there can be issues with values “translating” across cultures and geographies, there is no question that common values can go a long way toward binding people together in spite of different orientations and agendas. Six Sigma companies have another tool. They become more than the sum of their parts through a shared problem solving language that creates common ground and accelerates the learning process across organizational boundaries. Despite internal organizational differences, the need to increase customer effectiveness and shareholder efficiency are common denominators. As Six Sigma methodology becomes part of the way business is done, everyone thinks about and attacks efficiency and effectiveness challenges with a similar approach. Imagine people from service and finished goods business units, Human Resources, Finance and Operations, Mexico, Germany, and South Korea sharing a framework for talking about and attacking problems. This common approach/ language facilitates best-practice sharing and can dramatically accelerate the learning process and speed of improvements. 3.4 DPM for most processes is impossible. And therein lies its power. Not only does it establish a scoreboard and thus some friendly competition between teams, but it also establishes a big stretch target. You’re asking people to aim for performance levels far beyond what they consider possible. In the face of increasingly fierce global competition, it would be a mistake to underestimate the kind of competitive advantage that can be achieved by accelerating the learning process organization-wide.

Stretch Thinking: B.H.A.G.s

In college, a 90 or 93 percent gets you an “A.” But in a Six Sigma company, 93 per - cent is 3 sigma. That’s 66,000 DPM— which represents a lot of room for improvement. Moving from Three Sigma to Six Sigma represents a dramatic increase in performance. To give you a sense of the improvement, a Three-Sigma golfer, playing 100 rounds of golf per year, would miss one putt per round. A Six-Sigma golfer would miss one putt every 163 years. 3.4 DPM for most processes is impossible. And therein lies its power. Not only does it establish a scoreboard and thus some friendly competition between teams, but it also establishes a big stretch target. You’re asking people to aim for performance levels far beyond what they consider possible. With the challenge to keep up with their peers and the challenge of a big goal, people are constantly thinking and talking about how they can move the needles on the customer and business dials. Big goals can transform organizations 3 Six Sigma Imperceptibles continued from Page 2 In their book Built to Last, Collins and Porras point out that one of the characteristics that distinguishes companies that do well over long periods of time from those that are just around for a long time is that the former pursue big, hairy, audacious goals (BHAGs for short). 3.4 DPM is a BHAG. Even if you don’t achieve it, you’ll improve processes far beyond what you would have been able to achieve without those goals.

A Culture of Accountability

A broad quest for Six Sigma, both inside and outside operational areas, catalyzes a top-to-bottom change in thinking and in the way work gets done. Six Sigma companies understand customer specifications. They establish process and dial owners and set stretch goals for improving those measures. They continuously monitor outcome and leading indicator performance and report performance in open forums. And, it is easy for them to openly share performance breakthroughs across businesses and geographies. The synergistic, net effect of these changes is the creation of a “culture of accountability.” Accountability to customers to drive out variation and meet their specifications; accountability to shareholders to improve efficiency of internal processes; and accountability to employees to make the investments and remove roadblocks so efficiency and effectiveness improvements can be achieved and maintained. When (or even if) 3.4 DPM is achieved is incidental. The transformation of your company will have occurred long before.

About the Author

Art Davis is principal of The Davis Group, a Chicago area consultancy specializing in business process improvement and total quality. He has delivered many training programs in Six Sigma for Motorola, Caterpillar, ITW, Litelfuse and other firms. For more information call: 800-959-0632.
 

www.artdavisgroup.com

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