Lean Sixsigma and Operational Excellece00.ppt

Six Sigma and the Operations Transformation Initiative,1,DISCUSSION TOPICS,Background behind the effortPerspectives on Six SigmaNew thinking on operations transformationOpportunities and next steps,2,CONTEXT,Build Six Sigma/Operations transformation engine service line:Resurrect Six SigmaTake Six Sigma to the next levelGreenfield transformation programs,Current efforts,Initial project approach,2-month effortInterview-intensiveCompanies with Six Sigma programsBoutique consulting firmInternal Firm experts on Six Sigma and leanOutside-in financial analysis,What 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 questions,3,DISCUSSION TOPICS,Background behind the effortPerspectives on Six SigmaDefinitionApplication at companiesConsulting landscapeNew thinking on operations transformationOpportunities and next steps,4,THE STATISTICAL ORIGINS OF“SIX SIGMA”,A higher Sigma means less variation and a smaller probability of defects,Before,After,Target,Customer specs,2,i.e.,30.85%will fall outside customer specs,6,i.e.,only 0.003%will fall outside customer specs,5,Control 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 progress,2.Problem solving toolbox,3.Dedicated and certified resources,A TYPICAL SIX SIGMA PROGRAM CONSISTS OF 3 CORE ELEMENTS,1.Structured improvement methodology,6,SIX SIGMA HAS EVOLVED SIGNIFICANTLY IN ITS 15-YEAR HISTORY,DescriptionQuality-focused program using rigorous statistical analyses to reduce variability,DescriptionImprovement program focused on driving operational and financial excellence,DescriptionCorporate transformation program focused on development of business leaders as well as near-term financial impact,DescriptionContinuous improvement program developed to address the major business issues from cost reductions to growth,Era 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;”interviews,7,McKinsey clients with Six Sigma programs,Other McKinsey clients,1 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 ExpressBank of America CitigroupConocoDelphi AutomotiveDow ChemicalDuPontFord MotorGeneral ElectricHome DepotHoneywell IBMJP Morgan Chase,List of clients with Six Sigma programs,McKinsey clients within Fortune 100,(30%)*,(70%)*,Johnson&JohnsonLockheed MartinMcKesson HBOCMerrill LynchMicrosoftMotorolaSears RoebuckAllstateGeneral MotorsInternational PaperTargetVerizon,8,WHY CEOs HAVE EMBRACED SIX SIGMA,Initial attraction for CEOs with no experience with Six Sigma,Perceived 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 investment,9,SUCCESSFUL SIX SIGMA PROGRAMS ARE MULTIYEAR EFFORTS,Typical timing,0-3 months,3-18 months,2+years,Key activities,Develop 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 office,Select 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 positions,Communication,Phase 1Build foundationand architecture,Phase 2Capture near-term opportunities,Phase 3Evolve capabilities and sustain improvement pace,Assess 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 expertise,10,SIX 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,1998-2001,Source:Annual reports;press articles,11,.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 analysis,Underperforming or downward trend since launchOperating margin,percent,Allied Signal/HoneywellSix Sigma launched 1995,Company,Peer group,GE*Six Sigma launched 1996,BombardierSix Sigma launched 1997,Launch,DuPontSix Sigma launched 1999,MotorolaSix Sigma launched 1987,JP Morgan/JPM ChaseSix Sigma launched 1998,Launch,Launch,Launch,Launch,Launch,12,THE SIX SIGMA CONSULTING UNIVERSE CAN BE DIVIDED INTO 4 SEGMENTS,Large 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 redesigns,Boutique consulting firms offering Six Sigma servicesRath&StrongSix Sigma AcademyProvide structured training programsSome do program design,as well,Independent 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;interviews,CategoryExamplesTypical approach/value to client,Most significant players,13,DISCUSSION TOPICS,Background behind the effortPerspectives on Six SigmaNew thinking on operations transformationOpportunities and next steps,14,Solution drivers deliver near-term,bottom-line impact through series of projects,Deep subject matter expertise,e.g,Lean manufacturingPlatformingSupply managementPricingService operationsOthers,Problem solving approaches and tools,Structured approach used consistently across the organizationData drivenComprehensive from issue identification to implementationPortfolio of general problem solving toolsStatistical process controlProcess reengineeringOthers,CURRENT VIEW ON ELEMENTS OF SUCCESSFUL OPERATIONS TRANSFORMATION,Organizational enablers,Clear 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 line,LeadershipPerformance managementTalent/skill development,Transformation engine support and sustain solutions over time,Improvement infrastructure,ProgramdesignDedicated resourcesProgram support,Road 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 sharing,15,Solution drivers,Deep subject matter expertise,Problem solving approaches and tools,Structured approach Portfolio of tools,A WELL-EXECUTED SIX SIGMA PROGRAM ADDRESSES MOST ELEMENTS.,Organizational enablers,LeadershipPerformance managementTalent/skill development,Transformation engine,Improvement infrastructure,ProgramdesignDedicated resourcesProgram support,Lean manufacturingPlatformingSupply managementPricingService operationsOthers,Clear project selection guidelinesExcellent training and development program for high-caliber Black BeltsEmphasis on capturing and sustaining savings,Clear 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 processesVersatile toolkit with emphasis on data-driven analysis,16,.THOUGH A FEW GAPS CONSISTENTLY ARISE IN EVEN THE BEST PROGRAMS,Solution drivers,Deep subject matter expertise,Problem solving approaches and tools,Structured approach Portfolio of tools,Organizational enablers,LeadershipPerformance managementTalent/skill development,Transformation engine,Improvement infrastructure,ProgramdesignDedicated resourcesProgram support,Lean manufacturingPlatformingSupply managementPricingService operationsOthers,Focus 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 president,17,Solution drivers,Deep subject matter expertise,Problem solving approaches and tools,Structured approach Portfolio of tools,IN COMPARISON,LEAN HAS A DIFFERENT SET OF STRENGTHS,Organizational enablers,LeadershipPerformance managementTalent/skill development,Transformation engine,Improvement infrastructure,ProgramdesignDedicated resourcesProgram support,Lean manufacturingPlatformingSupply managementPricingService operationsOthers,Emphasis on systems/core operations,High aspirations ideal statePrescriptive policy deployment approachEmphasis on front-line capability building,Structured tools to support problem-solving,Deep expertisePrescriptive recommenda-tions in operations areas(e.g.,inventory management,18,.AND WEAKNESSES,Solution drivers,Deep subject matter expertise,Problem solving approaches and tools,Structured approach Portfolio of tools,Organizational enablers,LeadershipPerformance managementTalent/skill development,Transformation engine,Improvement infrastructure,ProgramdesignDedicated resourcesProgram support,Lean manufacturingPlatformingSupply managementPricingService operationsOthers,Can be intimidating to executives,Knowledge gaps outside operations,Long apprenticeshipNot prescriptive on program,structure/infrastructure,19,IMPLICATIONS,Lean 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 programs,20,DISCUSSION TOPICS,Background behind the effortPerspectives on Six SigmaNew thinking on operations transformationOpportunities and next steps,21,SEVERAL OPPORTUNITIES TO SERVE CLIENTS,Resurrect Six Sigma,Diagnose and reset basic requirements for Six Sigma program,Take Six Sigma to the next level,Incorporate subject-matter expertise(e.g.,lean,pricing,sourcing)into a successful Six Sigma program,Launch a green-field operations transformation program,Describe potential approaches Help senior leadership craft and roll out best program for the company,Recent client discussions,22,NEXT STEPS TO BUILD THE INITIATIVE,Knowledge building,Codify 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 approach,People,Recruit core team Develop broader affiliated group Launch internal Six Sigma training program,Client service,Aspirations 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,Communications,23,CURRENT LEADERSHIP TEAM,Felix Brueck(CL)Maia Hansen(CL)Celia Huber(PT)Stefan Knupfer(DT)Robert Lewis(CL)Jeff Long(LA)Fredric Ramioulle(DT)Tony Simone(MIA),