by John Knutsen

Director of Six Sigma
MS Corp Strategy, Planning and Analysis

What is Six Sigma?

Six Sigma is a powerful approach to improving processes to do things better, faster, and at lower cost. It can be applied to every facet of business, from production, to human resources, to order entry, to technical support.

Six Sigma started in the mid 1980s at Motorola in response to the needs of a sale force faced with increasing customer dissatisfaction and competitive pressures. To address these problems, Motorola created a set of formulas and tools that identified and measured what was important to their customers and then applied the findings to performance.

Any activity concerned with cost, timeliness, and quality of results can benefit from the Six Sigma approach. Unlike other quality improvement efforts, Six Sigma uses a specific philosophy, measure, and methodology to provide tangible savings that are directly traceable to the bottom line. The benefits of Six Sigma include:

• A clear focus on activities and attributes that are absolutely crucial to customers.
• The elimination of process variation and inconsistency.
• Targeted improvements that provide the largest financial return on effort and can be measured by increased profit, revenue, and customer satisfaction.
• Far-reaching shifts in company behavior and the active participation of top management.

The Six Sigma philosophy

The Six Sigma philosophy addresses the following:

• What is critical to your customers?
• How well are you performing today?
• How can you leverage facts and data?
• How can you sustain improvement?

What is critical to your customers?

Six Sigma encourages you and your organization to focus on what is absolutely critical to your customer by:

• Improving quality and performance in the areas of greatest reward.
• Translating what is critical to customers into something measurable.

Ultimately, reward is measured by increased profitability and increased customer satisfaction. To effectively improve the performance of your business, you must be able to measure quantitatively what your customers consider critical about your products or services. Six Sigma converts qualitative attributes into a metric, which is represented throughout this text as an uppercase Y.

Some terms to remember

Term	Definition
Critical to Quality (CTQ)	What your customer defines as absolutely critical about the products or services you deliver. CTQs are typically categorized under Time, Quality/Reliability, and Cost.
Y	The quantitative representation of the CTQ. It is also the metric leveraged throughout a Six Sigma project.

How well are you performing today?

Once you know what is critical to your customers and can measure it, you need to evaluate how well you are performing today. The measurement reflects the "baseline capability of the process" and corresponds to the variation within the process that creates your products or services.

Understanding the baseline capability of your process tells you:

• How much variation or inconsistency your customers are experiencing, and how much they associate their dissatisfaction with your performance.
• How much improvement is needed to satisfy your customer.

With this knowledge, you can evaluate recommendations for change.

Some terms to remember

Term	Definition
Baseline Capability	The current performance of the process prior to any improvement effort.
Variation	The change in Y experienced by customers as different processes are applied.

How can you leverage facts and data?

Facts and data are the backbone of Six Sigma. They are equally as important as a thorough understanding of customers' CTQs, because they are the basis for the decisions you make and the actions you take to improve your process.

When you leverage facts and data, you:

• Remove personal reactions and preferences as stumbling blocks.
• Eliminate both trial and error and gut feel as problem-solving tools.
• Encourage more efficient problem solving by identifying the best solution early.
• Validate the actions leading to improvement.

The fundamental Six Sigma formula is Y=f(x) (stated as "Y is a function of X"). You probably never expected to see an equation like this outside of college or high school. Basically, this means that your ability to consistently and predictably deliver products or services to your customer is a function of the inputs (X) of your process. Like baking a cake, the quality (or CTQs) of a product depends on the ingredients (Xs) you use.

When leveraging Y=f(x), look for those few Xs that create most of the variation in your process. It can be difficult to know which Xs are important. However, analysis of more than 100 projects executed within one Six Sigma program shows that most process variation can be traced back to fewer than five inputs.

Some terms to remember

Term	Definition
Y=f(x)	The performance equation leveraged throughout a Six Sigma project.
X	The inputs that go into the process and allow the process to function.
f(x)	The concept that each input contributes variation into the process. The sum of variations represents the total variation within the process.

How can you sustain improvement?

In addition to driving quantum improvements in performance and quality, Six Sigma ensures that you can sustain these improvements. This is critical to the success of the Six Sigma approach.

Within Six Sigma, you manage the inputs of the process rather than the output, and ensure sustainability by implementing tools and documentation. By monitoring the variation in the critical Xs and responding quickly to limit variation and inconsistencies in the process, you achieve predictability and consistency. Ultimately, this translates into greater customer satisfaction and bottom-line rewards.

Six Sigma as a measure

Sigma represents the standard deviation (variation, inconsistency, or lack of predictability) in a process. In this case, the value of sigma is equal to the standard deviation expressed in the number of defects per million tries (DPPM) in the second table below. The sigma measure (or index number) represents the amount of variation that fits within customer expectations. In order to have Six Sigma capability, the variation would be small enough for you to fit plus or minus six standard deviations within customer expectations.

As your process improves (that is, allows for less variation and inconsistency), the sigma measure improves, moving from 0, at worst, to 6, the target. If variation in your process increases, so does the size of sigma, which means you can fit fewer sigma within customer expectations. Therefore, as variation increases, the sigma measure decreases.

Some terms to remember

Term	Definition
Standard deviation	A mathematical term representing the spread of data within a sample.
Customer expectations	The acceptable range of performance specified by the customer, which usually consists of a goal (target) and a certain amount of deviation from that goal (upper and/or lower limit).
Defect	The result of missing customer expectations.

Just how good is Six Sigma capability?

The following table represents the relationship between a sigma measure, defects per million tries (DPPM), and success rate (Yield %). If a process is performing at Six Sigma, it is producing only 3.4 defects per every million times the process produces an output. In other words, the process is 99.99966% defect-free.

Sigma	DPPM	Yield (%)
0	933192.8	6.68072
1	691462.5	30.85375
2	308537.5	69.14625
3	66807.2	93.31928
4	6209.7	99.37903
5	232.6	99.97674
6	3.4	99.99966

Isn't 99% efficiency good enough?

Take a look at the difference between processes running at a 99% success rate and those running at a 99.99966% (Six Sigma) success rate:

Process	99% successful (3.8 sigma)	99.99966% successful (6 sigma)
Technical support resolving issues in one contact (ex. volume 61,000 issues per month)	610 issues per month that require more than one contact to resolve client issues	3 issues per year that require more than one contact to resolve client issues
Clients attempting to connect to the network through wireless connections (ex. 43,000 attempts per day)	430 failed attempts per day to connect to the network through wireless connections	4 failed attempts per month to connect to the network through wireless connections
System breach attempts into secured networks (ex. 10,000 attempts per day)	100 successful system breaches per day	12 successful system breaches per year

There are two key points here:

• There is a significant difference in performance between a process that is 99% effective and a process running at a Six Sigma capability.
• You do not need to be at Six Sigma to achieve significant results. As you move toward Six Sigma, you will see dramatic shifts in performance.

The "hidden office"

The difference between 99.99966% efficiency (Six Sigma) and 99% efficiency can be thought of as the "hidden office." The hidden office represents all activity that results in defects (not meeting customer expectations) or not doing things right at the first attempt. Customers don't pay for the hidden office.

For example, say a company bills 8 million customers on a monthly basis. If the process were performing at a 99% success rate, 80,000 customers would be incorrectly billed each month. The hidden office represents the costs and resources required to find and fix incorrect billings, and to address customer dissatisfaction.

Because Six Sigma targets improvements for financial gain, it's crucial to understand how much it costs an organization to run at less than Six Sigma capability. What is the cost associated with not meeting customer expectations or with not doing things right at the first attempt? The following table provides a general idea of the impact of varying performance levels.

Sigma	DPPM	Cost of poor process
1	691462.5
2	308537.5	30–40% of sales
3	66807.2	20–30% of sales
4	6209.7	15–20% of sales
5	232.6	10–15% of sales
6	3.4	less than 10% of sales

The Six Sigma methodology

The Six Sigma problem-solving methodology and tool set are known as DMAIC: Define, Measure, Analyze, Improve, and Control. The following table provides a high-level overview of the objectives and activities in each phase.

Phase	Objective	Activities
Define	Zero in on a specific problem with defined return on effort	Define customer CTQs Establish measurement metrics (Y) Leverage 80/20 rule to set project focus Understand high-level flow of activity Calculate savings opportunities
Measure	Determine current process performance and identify key improvement measures	Validate the integrity of the data Calculate process capability Identify key inputs
Analyze	Validate the process for improving performance	Validate key inputs by leveraging statistical tools Establish an improvement plan
Improve	Improve performance and validate realized results	Run improvement pilot Validate improvements by leveraging statistical tools Validate improved process capability Calculate financial impact
Control	Implement controls to ensure continued performance	Finalize implementation of improvements Update documentation Implement process controls Validate process stability Hand off and close

Put Six Sigma to work for your company

Over the past 20 years many companies have successfully leveraged Six Sigma to increase their competitive position in their markets. GE, for instance, became a major adopter of Six Sigma in the mid 1990s. Reports indicate that GE has saved over 4 billion dollars and shifted their gross margin from a 10%–12% range to a 12%–15% range. Many articles cite GE's success as directly linked to the use of Six Sigma.

Any organization, large or small, can accomplish success similar to GE's by assimilating Six Sigma's philosophy, measure, and methodology into the fabric of their business.