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Cutting Costs with Six Sigma – Making a “Comeback”?

July 19th, 2010

A recent BusinessWeek article made the argument that Six Sigma is staging a “comeback” right now, specifically in retail.  The idea put forward is that sales growth will remain sluggish for some time and companies are trying to squeeze out more costs to maintain/improve margins.  The article went so far as to say that a “jobless recovery” may be the RESULT of more and more companies embracing Six Sigma.

While I think that may be taking things a bit far, it’s hard to argue that many companies have leaned out their workforces to bare bones levels.  Even with improvements in the global economy starting to show up, I think companies will indeed remain reluctant to add headcount for the foreseeable future. And, this is the new state of affairs all the way up the value stream, creating a trickle back effect. Companies have fewer resources to get work done, so what do they do?   They push work (value) back to their suppliers and partners. It’s really a pretty simple reality for most companies … do more, do it faster, do it with fewer resources, and do it at a lower cost.

Enter Six Sigma.  Except, it isn’t Six Sigma that is necessarily the answer; it’s Process Improvement and Optimization (PI).  There are many proven business tools and methodologies to do PI (e.g. BPM, Six Sigma, Lean, Lean Six Sigma, DFSS, etc).  Structured PI has been around for 25+ years. It’s never really gone away, hence I have a problem with the notion of a “comeback”.

However, I think PI is and will continue to be looked at in a very different way.  I don’t see a return any time soon to large, top-down, training-focused initiatives that are often associated with a Six Sigma deployment. Big training-focused initiatives that require a big up-front investment and take many months, if not years, to deliver any quantifiable results may be gone for good.

But, this isn’t necessarily a bad thing.  I think it’s just the next evolution to something better.  PI is going to be more results-focused, as opposed to training-focused.  The needs of the business will pull training, as opposed to one-size fits all training being pushed down to the organization.  There will be a focus on breaking boil-the-ocean initiatives down to more manageable, tighter scoped things that can yield incremental results in a very short timeframe.  Green Belts, Yellow Belts, and Lean Practitioners will execute more projects that yield incremental improvements, as opposed to massive breakthroughs.  PI will be tightly tied to real business operations, as opposed to being that big on-the-side initiative.  Successful PI will use very tactical wins to create strategic advantage and sustainability.

So, let’s summarize.  What are some likely characteristics of post-meltdown PI ?

  • Lower upfront investment required
  • Focuses on things that can have an immediate positive impact on the business.  Squeaky wheel, project-for-the-sake-of-a-projects need not apply
  • Gets measurable results fast, incremental quick wins
  • Results-focused, not training-focuses.  Training is a means to an end and pulled based on the needs of the business
  • Sustains itself through results.  Pay-as-you-go.  Size and scope of PI efforts are in direct proportion to the bottom line results being delivered for the business

A brave new world, but one where a well executed PI effort just might be the difference between the winners and the losers.

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