Lean Sixsigma and Operational__ Excellece_00.ppt

Lean Sixsigma and Operational_ Excellece_001DISCUSSION TOPICSBackground behind the effortPerspectives on Six SigmaNew thinking on operations transformationOpportunities and next steps2CONTEXTBuild Six Sigma / Operations transformation engine service line:Resurrect Six SigmaTake Six Sigma to the next levelGreenfield transformation programsCurrent effortsInitial project approach2-month effortInterview-intensiveCompanies with Six Sigma programsBoutique consulting firmInternal Firm experts on Six Sigma and leanOutside-in financial analysisWhat is Six Sigma?How has it been applied at companies?How is the Six Sigma consulting landscape structured?What are the implications for the Firm?In-going questions3DISCUSSION TOPICSBackground behind the effortPerspectives on Six SigmaDefinitionApplication at companiesConsulting landscapeNew thinking on operations transformationOpportunities and next steps4THE STATISTICAL ORIGINS OF “SIX SIGMA”A higher Sigma means less variation and a smaller probability of defectsBeforeAfterTargetCustomer specs2, i.e., 30.85% will fall outside customer specs6, i.e., only 0.003% will fall outside customer specs5B. Universal metric based on reduction of variance for critical to quality (CTQs) metricsControl charting/statistical process control (SPC)Hypothesis testingPareto chartsBrainstormingProcess mappingRoot-cause problem solvingDesign of experimentVoice of the customerEtc.Master Black Belts(full time)Responsible for lasting resultsSupport project selection, training/coaching of black belts, and reporting progressBlack Belts(full time)Lead improvement projects through DMAIC cycleReceive 4 weeks of up-front trainingGreen Belts(part time)Provide black belts with support to get projects doneReceive less intensive training2. Problem solving toolbox3. Dedicated and certified resourcesA TYPICAL SIX SIGMA PROGRAM CONSISTS OF 3 CORE ELEMENTSDefine the problemMeasure the problemDefineMeasureAnalyzeImproveControl Analyze and identify gapIdentify and imple-ment solutionsTrack and review progressDMAICA. Standardized, disciplined problem solving approach 1. Structured improvement methodology6SIX SIGMA HAS EVOLVED SIGNIFICANTLY IN ITS 15-YEAR HISTORY DescriptionQuality-focused program using rigorous statistical analyses to reduce variabilityDescriptionImprovement program focused on driving operational and financial excellenceDescriptionCorporate transformation program focused on development of business leaders as well as near-term financial impactDescriptionContinuous improvement program developed to address the major business issues from cost reductions to growthEra 1:Focused on qualityMotorola (1987)Era 2: Linked to financial performanceAllied Signal (1994)Era 3:Integrated into performance improvement agendaGeneral Electric (1996)Era 4: Applied to broader business issuesBombardier (2002)Source: Pande, Neuman and Cavanaugh, “The Six Sigma Way: How GE, Motorola, and Other Top Companies are Honing Their Performance;” interviews72558McKinsey clients with Six Sigma programsOther McKinsey clients1 IN 3 McKINSEY CLIENTS IN THE FORTUNE 100 ARE SIX SIGMA COMPANIES * Companies which are testing Six Sigma (e.g., Target, Verizon), have rolled out Six Sigma in limited business units or functions (e.g., International Paper), or have not yet made official announcements about their Six Sigma programs (e.g., Allstate, GM)Source: Team analysis American Express Bank of America Citigroup Conoco Delphi Automotive Dow Chemical DuPont Ford Motor General Electric Home Depot Honeywell IBM JP Morgan ChaseList of clients with Six Sigma programsMcKinsey clients within Fortune 100(30%)*(70%)* Johnson & Johnson Lockheed Martin McKesson HBOC Merrill Lynch Microsoft Motorola Sears Roebuck Allstate General Motors International Paper Target Verizon8WHY CEOs HAVE EMBRACED SIX SIGMAInitial attraction for CEOs with no experience with Six SigmaPerceived as low risk Highly-publicized success stories Straightforward approach Language is not intimidating to executives with nonoperational backgroundsProgram is recognized and respected by Wall StreetDelivers financial impactPress and fellow CEOs have built a perception of financial gains from Six Sigma implementation“Easy-win” projects create quick return on investmentRecognition of “softer” benefits by CEOs with Six Sigma experience Builds capabilities throughout the organization“Off-the-shelf” training programsDedication and certification of Six Sigma experts (e.g., black belts) allows companies to develop future leaders and identify and recruit external talent“Learn-by-doing” approach ensures sustainabilityAssists in creation of performance-driven cultureQuantifiable baselines and standardized tracking tools create accountabilityTight linkage of metrics from senior level to front-lineIncreases focus on customerIdentification of important criteria to customers and measurement critical to Six Sigma methodologyEmphasis on both internal and external customer9SUCCESSFUL SIX SIGMA PROGRAMS ARE MULTIYEAR EFFORTSTypical timing0-3 months3-18 months2+ yearsKey activitiesDevelop senior-level support and fluencyDesign program architecture to focus on key business issuesEnsure basic corporate programs are in place to support Six SigmaDesign and staff central program officeSelect dedicated people (e.g., black belts) and assign projectsTrain MBBs, BBs, GBs, and other roles if applicableDefine, launch, and execute first waves of projects (25+)Visibly promote Six Sigma personnel back into key line positionsCommunication Phase 1Build foundationand architecturePhase 2Capture near-term opportunitiesPhase 3Evolve capabilities and sustain improvement paceAssess readiness“Taking Six Sigma to the next level”“Getting the basics right”Launch follow-on waves of projectsRevise performance management systems to incorporate key operating metrics and CTQsApply Six Sigma to broader range of business issues by injecting and institutionalizing world-class subject matter expertise10SIX SIGMA IS FREQUENTLY HAILED FOR ITS FINANCIAL IMPACT . . .“Weve generated an estimated $3.5 billion in savings through Six Sigma and digitization methodologies since 1995” Allied Signal, 1995-2002“The financial returns (from Six Sigma) have now entered the exponential phase more than $750 million in savings beyond our investment in 1998, with $1.5 billion in sight for 1999” GE, 1996-1998“In 2000-01 alone, Bombardier realized $242 million in net cash flow savings directly attributable to Six Sigma projects” Bombardier, 1997-2000“We have documented more than $16 billion in savings as a result of our Six Sigma efforts” Motorola, 1987-2002“In addition to reducing the frustration level of Ford customers, so far Six Sigma has saved Ford $500 million” Ford, 2000-2002“(CEO Sandy) Warner says that Six Sigma helped to save $1.1 billion in 1999, enabling him to spend $700 million to build up an on-line financial service and equity teams in Germany and Japan” JP Morgan, 1998-2001Source: Annual reports; press articles110%4%8%12%16%20%1992 1994 1996 1998 20000%4%8%12%16%20%1996199820000%4%8%12%16%20%1994199619982000. . . HOWEVER, SIX SIGMA DOES NOT INDEPENDENTLY GUARANTEE SUPERIOR PERFORMANCE Outperforming peers since launchOperating margin, percent * GEs peer group comprises Tyco, 3M, Siemens, ABB and TextronSource:Compustat; McKinsey analysisUnderperforming or downward trend since launchOperating margin, percentAllied Signal/ HoneywellSix Sigma launched 1995CompanyPeer groupGE*Six Sigma launched 1996BombardierSix Sigma launched 1997Launch0%4%8%12%16%20%1995199719992001DuPontSix Sigma launched 19990%4%8%12%16%19851989 19931997 2001MotorolaSix Sigma launched 19870%10%20%30%40%50%1992 1994 1996 1998 2000JP Morgan/JPM ChaseSix Sigma launched 1998LaunchLaunchLaunchLaunchLaunch12THE SIX SIGMA CONSULTING UNIVERSE CAN BE DIVIDED INTO 4 SEGMENTSLarge corporations with Six Sigma consulting armsGE Medical SystemsGE PlasticsMotorola InstituteOffer Six Sigma services to customers and suppliers in return for additional sales or price breaksLeverage internal Six Sigma experience Large consulting firms with Six Sigma service linesPWCCAP GeminiIntroduce Six Sigma to existing audit or systems clients Integrate Six Sigma into process redesignsBoutique consulting firms offering Six Sigma servicesRath & StrongSix Sigma AcademyProvide structured training programsSome do program design, as wellIndependent contractorsHundreds of individuals ProfessorsConduct training at department level or belowIndividuals are typically former GE black beltsLow cost ($2,000-5,000 per employee trained)Source: International Society of Six Sigma Professionals; interviewsCategoryExamplesTypical approach / value to clientMost significant players13DISCUSSION TOPICSBackground behind the effortPerspectives on Six SigmaNew thinking on operations transformationOpportunities and next steps14Solution drivers deliver near-term, bottom-line impact through series of projectsDeep subject matter expertise, e.g, Lean manufacturingPlatformingSupply managementPricingService operationsOthersProblem solving approaches and toolsStructured approach used consistently across the organization Data driven Comprehensive from issue identification to implementationPortfolio of general problem solving tools Statistical process control Process reengineering OthersCURRENT VIEW ON ELEMENTS OF SUCCESSFUL OPERATIONS TRANSFORMATIONOrganizational enablersClear articulation of goalsVisible, sustained involvementSenior team alignmentMetrics tied closely to financials and key operationsCascaded to front lineRigorous consequencesTraining and talent management at all levelsTrue understanding and buy-in to change particularly at front lineLeadershipPerformance managementTalent/skill developmentTransformation engine support and sustain solutions over timeImprovement infrastructureProgramdesignDedicated resourcesProgram supportRoad map for the initiativeProject prioritizationSmall central coordinating staffSelection of best to staff initiativeClear career path to line rolesSpecialized trainingProject management capabilitiesTracking and reporting of metricsKnowledge sharing15Solution drivers Deep subject matter expertiseProblem solving approaches and toolsStructured approach Portfolio of toolsA WELL-EXECUTED SIX SIGMA PROGRAM ADDRESSES MOST ELEMENTS . . . Organizational enablersLeadershipPerformance managementTalent/skill developmentTransformation engine Improvement infrastructureProgramdesignDedicated resourcesProgram supportLean manufacturingPlatformingSupply managementPricingService operationsOthersClear project selection guidelinesExcellent training and development program for high-caliber Black BeltsEmphasis on capturing and sustaining savingsClear roles and expectations for senior executivesProject metrics tied closely to financials/CTQsNew language instills rigor in day-to-day problem solving Well-structured problem solving processes Versatile toolkit with emphasis on data-driven analysis16. . . THOUGH A FEW GAPS CONSISTENTLY ARISE IN EVEN THE BEST PROGRAMSSolution drivers Deep subject matter expertiseProblem solving approaches and toolsStructured approach Portfolio of toolsOrganizational enablersLeadershipPerformance managementTalent/skill developmentTransformation engineImprovement infrastructureProgramdesignDedicated resourcesProgram supportLean manufacturingPlatformingSupply managementPricingService operationsOthersFocus on dis-crete projects can distract leaders from evaluating and improving broader business processes and performance systems General problem solving toolkit lacks prescriptive recommen-dations on specific topics“Six Sigma always results in an answer, but not always the best answer” Black Belt“We were so focused on the quick wins, we never stepped back to ensure that we were fundamentally improving our business” LOB president17Solution drivers Deep subject matter expertiseProblem solving approaches and toolsStructured approach Portfolio of toolsIN COMPARISON, LEAN HAS A DIFFERENT SET OF STRENGTHS Organizational enablersLeadershipPerformance managementTalent/skill developmentTransformation engineImprovement infrastructureProgramdesignDedicated resourcesProgram supportLean manufacturingPlatformingSupply managementPricingService operationsOthersEmphasis on systems/core operationsHigh aspirations ideal statePrescriptive policy deployment approachEmphasis on front-line capability building Structured tools to support problem-solving Deep expertise Prescriptive recommenda-tions in operations areas (e.g., inventory management18. . . AND WEAKNESSESSolution drivers Deep subject matter expertiseProblem solving approaches and toolsStructured approach Portfolio of toolsOrganizational enablersLeadershipPerformance managementTalent/skill developmentTransformation engineImprovement infrastructureProgramdesignDedicated resourcesProgram supportLean manufacturingPlatformingSupply managementPricingService operationsOthersCan be intimidating to executives Knowledge gaps outside operationsLong apprenticeshipNot prescriptive on program, structure/infrastructure19IMPLICATIONSLean and Six Sigma can be complementaryBoth programs can help a company transform its operationsBoth have gaps We have a unique opportunity to help companies tailor an approach that fits their needs likely through a combination of several programs20DISCUSSION TOPICSBackground behind the effortPerspectives on Six SigmaNew thinking on operations transformationOpportunities and next steps21SEVERAL OPPORTUNITIES TO SERVE CLIENTSResurrect Six SigmaDiagnose and reset basic requirements for Six Sigma programTake Six Sigma to the next levelIncorporate subject-matter expertise (e.g., lean, pricing, sourcing) into a successful Six Sigma programLaunch a green-field operations transformation programDescribe potential approaches Help senior leadership craft and roll out best program for the companyRecent client discussions22NEXT STEPS TO BUILD THE INITIATIVEKnowledge buildingCodify basic beliefs and approach for the transformation engine Develop approach to integrate our subject-matter expertise with Six Sigma methodology (e.g., lean, sourcing, pricing)Lay-out “best practice” greenfield operations transformation approachPeopleRecruit core team Develop broader affiliated group Launch internal Six Sigma training program Client serviceAspirations for the next 6 monthsHelp 1-2 clients recharge existing Six Sigma programsWork with 1-2 Six Sigma companies to inject functional expertiseSupport one large greenfield transformation Syndicate perspectives and build fluency on topic with sector / FCG leadersPublish perspectives in Quarterly, other Communications23CURRENT LEADERSHIP TEAMFelix Brueck (CL)Maia Hansen (CL)Celia Huber (PT)Stefan Knupfer (DT)Robert Lewis (CL)Jeff Long (LA)Fredric Ramioulle (DT)Tony Simone (MIA)