KEY SIX SIGMA CONCEPTS

At its core, Six Sigma revolves around the following key concepts.

APPLICATION OF SIX SIGMA METHODOLOGIES TO IT

Several process improvement methodologies like Six Sigma, which have been successfully implemented in the manufacturing industries sector, was perceived ineffective in the IT services industry. Some commonly made arguments against the effectiveness of Six Sigma in IT services sector were:

Though these factors are true in some sense, the Six Sigma methodology can still be applied to IT processes. Six Sigma offers strong tools like Quality Function Deployment (QFD), CTQ flow-down and other templates to convert high level VOC into measurable CTQs.

90% of the processes in a software services company are repeatable and can be improved by the process improvement DMAIC methodology. The DFSS methodology can be applied to the remaining

5-10 % of the processes, which involve creativity. It is true that Six Sigma concepts evolved with normal distribution. But, Six Sigma tools can be easily adapted to handle processes having non-normal distribution.

The software development life cycle (SDLC) consists of four phases - Analysis, Design, Coding and Testing. Along with these core phases, processes like defect prevention, project management, Software Quality Assurance (SQA), Reviews, etc. are an integral part of the Quality Management System of any IT service provider. The effectiveness of these core processes directly impact the CTQ parameters. There is a large scope for improvement in these processes in most IT companies.

Six Sigma can be deployed to improve these processes.  One of the key factors in deploying Six Sigma is identifying the “Y” metrics (dependants). But for core processes this becomes simpler since historical data for key metrics such as review efficiency, review effectiveness, productivity, defect density, schedule variance and effort variance are already available. After prioritization, critical poor performing metrics can be taken as Six Sigma DMAIC projects.

Six Sigma DFSS methodology can be applied for software development projects. Six Sigma in SDLC helps in making the software manufacturing process more predictable and ensuring that all Customer CTQs are met. Some Sigma tools that can be applied in this methodology are –

Among IT-focused Six-Sigma efforts, Dow Chemical adopted Six Sigma in most of its scorecards and IT measurement systems and generates reports using Six-Sigma terminology. Dow describes its effort as standardized and user-focused (as opposed to systems-centric), giving IT and business units a common language for quality — for example, "What defects or variations exist in my IT systems?" or "What steps are we taking to reduce defects or variations?” This discipline has helped to determine the relative priority of user needs to assist in defining service levels with business value.

In launching a Six-Sigma strategy, leadership identifies the business objectives of key enterprise processes, determines how to measure their effectiveness and efficiency, and then selects processes of high impact, but low performance for Six-Sigma "tactics." The idea is to reduce the deviation between the average user or customer experience and the customer's requirements — "sigma" being the value for one standard deviation.

Studies indicate that most service enterprises operate at two- or three-sigma levels — that is, with poor-quality customer experiences between seven (three sigma) and 31 (two sigma) out of 100 opportunities. Six-Sigma tactics seek to reduce these bad customer experiences to levels of two in 10,000 or three in a million, for five- and six-sigma levels, respectively.

Six Sigma uses separate methodologies for process improvement and for process and product design. The Six Sigma methodology for improving an existing process is called DMAIC, an acronym for the five steps of process improvement: Define, Measure, Analyze, Improve, Control. (See Appendix 2)

Using Six Sigma methodology to develop a new process or product, or to make large-scale changes in an existing process, is known as Design for Six Sigma (DFSS). DFSS is a methodology for extracting the voice of the customer and converting it into quantitative design requirements. This forces product designers to meet real customer requirements and stimulates top-line growth, not just bottom-line savings. The expected process Sigma level for a DFSS product or service is at least 4.5 (no more than approximately 1 defect per thousand opportunities), but can be 6 Sigma or higher depending the product. Producing such a low defect level from product or service launch means that customer expectations and needs (CTQs) must be completely understood before a design can be completed and implemented.

Numerous companies have defined different sequences of steps for DFSS.

The most popular version of DFSS is DMADV (Define, Measure, Analyze, Design, Verify).

A slight modification on the DMADV methodology is DMADOV (Define, Measure, Analyze, Design, Optimize and Verify).

IDOV is a well known design methodology, especially used in the manufacturing world. It consists of Identify, Design, Optimize and Verify.

DMEDI is being taught by PricewaterhouseCoopers and stands for Define, Measure, Explore, Develop and Implement. This roadmap is focused purposed to obtain significant competitive advantages or quantum leaps over current environments.  However DMEDI Projects tend to be more time and resource intensive.

The latest innovation in Six Sigma is Motorola’s integrated Six Sigma management system, known as the New Six Sigma, or second-generation Six Sigma. It is also referred to by the acronym AMAG, for its four leadership principles: Align, Mobilize, Accelerate, Govern. AMAG is designed to enhance the effectiveness of Six Sigma outside of manufacturing and engineering environments, and to yield faster and more sustainable results. Like the Six Sigma methodologies, it provides a framework for understanding customer requirements, continuously driving process improvement, and using statistical analysis to drive fact-based decision-making. It goes beyond DMAIC and DFSS, however, by offering a broader, integrated approach for executing full business strategies. AMAG is designed to help a company simultaneously achieve short-term financial gains through fast business improvement, and build future capability in key talent and critical processes. The term process refers in this sub-methodology of Six Sigma not just to classic product and service domains, but also to goals such as market share improvements, better cash flow, and better HR processes. The four leadership principles of AMAG are summarized below.

Project characteristics that determine the relevance of a particular methodology can be based on following dimensions—project size, application domain, and criticality. To understand how each process works within an organization, it’s important to understand the individual maturity and key process areas. (See Appendix 3)

The Six-Sigma approach is not exclusive of other quality management or methodology initiatives. IT organizations already committed to or evaluating such approaches as the Capability Maturity Model or the IT Infrastructure Library will find them complementary. The CMM, for example, does not prescribe metrics or measurement techniques, so that Six Sigma's approach to statistically assessing variances does not violate the CMM. Thus, with some rationalization, other quality management or methodology initiatives can be reinforced via Six-Sigma techniques: ITIL can be used to describe the desired state for an IT project, while CMM can be used to assess the maturity level of existing processes. In other words, ITIL tells where the project needs to be, CMM tells where it is today, and Six Sigma helps to get from one state to the other.

� Use Six Sigma to achieve ITIL best-practice state. ITIL focuses on identifying best practices with regards to managing IT service levels and is very process-oriented. Therefore, when IT is pursuing process optimization programs, its first step should be to map current processes against the ITIL framework. The ITIL framework serves as the destination or “should-be” state for IT processes. But ITIL doesn’t explain how to allocate priorities.

� Use CMM to assess Six-Sigma-driven progress. Likewise, CMM provides a framework for assessing the maturity of processes. Before implementing an IT process improvement project, IT can use CMM to baseline the existing process from a maturity perspective. A CMM approach may indicate that a project is at an early stage of maturity. Once the project manager have used ITIL to map out where the process should be and have used CMM to baseline the existing process, s/he can use Six Sigma to implement specific process improvement initiatives that will move the process from the current baseline toward a fully ITIL-compliant best practice. 
 

The problem: The project involved the process of how deposits were made to this bank. Since it was an "online" bank, there were no branches for customers to use. Instead, deposits were mailed using the United States Postal Service (USPS). Savings resulting from the lack of branches and tellers were passed along to the customer in the form of higher rates, free services, etc.

Customer focus groups and surveys indicated that the process of making a deposit is of critical importance to a customer. The process from the customer's viewpoint is very straightforward -- they sign a check, fill out a deposit slip, and mail both to the bank. Deposits were the second largest driver of inquiries to the customer call center (13% of all calls). Customers expressed frustration in mailing delays and couldn't understand why their checks took so long to post to their account.

The bank's mission was to receive the deposits as quickly as possible and begin the deposit and check clearing cycle. When the bank originally set up the processes, a decision was made to establish 'local' deposit locations around the United States. These local deposit locations received the deposits and overnight express reshipped them to a central processing location daily.

This local receipt and express reshipment to a central location was done for two main reasons:

The DMAIC Project 
A project charter was created identifying exactly what the process entailed. The business case was written, the problem statement crafted and the scope clearly identified. The team was formed and quickly moved into the measurement phase. Data surrounding the deposits was collected and the analyze phase began to yield some alarming results.

Data and Root Causes 
Data collection, however, revealed a few flaws that weren't originally identified:

Additional Findings 
An additional analysis of deposits made to a 'local' deposit location with express reshipment to a national location versus mailing directly to a centralized, national location yielded the following results:

Project Conclusions 
It didn't take further data collection to convince the leaders of the business to modify their deposit process and move to a centralized, national process. The facts spoke for themselves. Cost savings resulting from only printing one address envelopes (instead of numerous local), reduced overhead associated with processing, fewer customer inquiry calls and investigations, and a more stable process resulted in savings of $4MM per year.

Businesses that implement Six Sigma report numerous benefits, including fewer defects, improved cycle time, higher customer focus, increased customer satisfaction, lower costs, higher employee focus, better (data-driven) decision-making, and a more effective management vision. In short, processes run better, faster, and at lower cost. But these gains can be expected only if a company first makes significant investments in training, organizational infrastructure, and cultural evolution (all employees thinking about how their actions impact the customer; all communicating with consistent language). Because the training and other start-up costs for Six Sigma are fairly high, it has generally been implemented by large corporations with large consulting budgets. Smaller companies would also have trouble with the expense of assigning one or more employees to work full-time just on Six Sigma. In a Quality Digest survey of companies using Six Sigma, only 16 percent of respondents were in companies with fewer than 500 employees, and in two thirds of those cases, the "small company" was really part of a larger company.

Many consultants, however, have developed training materials or off-site courses to enable smaller companies to implement Six Sigma, too. On-line training, offered by Motorola, is another cost-effective way for a smaller company to train its employees. Six Sigma software can also aid a smaller company by reducing the burden of processing Six Sigma analysis. Even so, it is unlikely that the full Six Sigma program with a full-time Six Sigma practitioner will be practical for most smaller companies. It will probably be necessary for smaller companies to adapt the program to fit their situations, so that employees could be trained and use Six Sigma skills as part of their existing jobs, instead of the company dedicating a full-time Six Sigma employee.