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DOES SIX SIGMA HAVE A FUTURE? THE GREAT DEBATE

Gerry Hahn Roger Hoerl

Former Manager Current Manager

Martha Gardner Angie Patterson

Quality Leader Senior Statistician

Applied Statistics Laboratory

GE Global Research

Schenectady, NY 12309

2004 Quality & Productivity Research Conference

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IS, OR WAS, SIX SIGMA A FAD?

• Fad: (American Heritage Dictionary): A fashion that is taken up with great enthusiasm for a brief period of time; a craze • Fad (common language): Flavor of the day.

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TALK OUTLINE• Prelude: How Six Sigma came to GE• The debate: In “Point-Counterpoint” Format

▪ Six Sigma Bottom Line Impact Exaggerated▪ Basic Six Sigma Concept is Flawed▪ There is Nothing New to Six Sigma▪ Six Sigma adds Bureaucracy▪ Other Faults of Six Sigma▪ Six Sigma is already Waning

• Summary• Your turn

DISCLAIMER: VIEWS EXPRESSED NOT NECESSARILY THOSE OF THE PRESENTERS!

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HOW 6 SIGMA CAME TO GE

• Jack Welch came to recognize cost of quality

• Talked to Larry Bossidy• Bossidy recommended Six Sigma and

Mikel Harry• Mikel Harry trains first waves of

champions and MBBs• Champions and MBBs take over in each GE

business• Process repeated with DFSS (and Maurice

Berryman)

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• Why is GE stock valued today only about half of what it was at height of Six Sigma fervor?• GE claimed the following savings from Six Sigma in its annual reports:

• 1996: $170MM (for $200MM investment) • 1997: $700MM (for $380MM)• 1998: $1200 MM (for $450MM• 1999: $2000 MM (for $550MM)

• Such claims seem dubious in light of recently exposed financial manipulations in other companies

Point: BOTTOM LINE IMPACT EXAGGERATED

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Counterpoint: BOTTOM LINE IMPACT EXAGGERATED

- Nobody ever claimed Six Sigma will impact short-term stock prices

▪ Savings carefully audited by critical and impartial accountants

P.S. GE stock value has increased over four-fold from start of Six Sigma (October 1995) to today

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Concept of 3.4 defects per million (dpm) opportunities is flawed: • Deming: Setting numerical goals results in search for ways to manipulate measurement system, rather than to improve process• All products are not created equal: Jet engine versus toaster• Definition of “defect” and “opportunity” especially manipulatable And what’s all this nonsense about the supposed omnipresent 1.5 sigma mean shift?

Point: BASIC SIX SIGMA CONCEPT IS FLAWED

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• Concept of 3.4 defects per million opportunities • Simplifies concepts • Presents numerical goals to management• Provides common language

• In practice, Six Sigma rests on• Disciplined approach to addressing problems• Data-based approach to reducing variability and improving quality• Focus on customer

and not on 3.4 defects per million opportunities (or on 1.5 sigma mean shift)

Counter Point: BASIC SIX SIGMA CONCEPT IS FLAWED

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• Disciplined process is just plain common sense• Six Sigma is just statistics under a different name• There are no new statistical tools in Six Sigma • DMAIC, DMADV, etc. are imitators of Shewhart’s PDCA cycle and TQM

Point: THERE IS NOTHING NEW TO SIX SIGMA

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• The goal of Six Sigma is to be effective—not novel• What’s wrong with common sense and a disciplined customer-oriented approach? • Six Sigma is much more than statistics—it integrates the most powerful tools available • Six Sigma is improving quality WHAT IS NOVEL ABOUT SIX SIGMA IS THE DISCIPLINED INTEGRATION OF PROVEN APPROACHES

Counter Point: THERE IS NOTHING NEW TO SIX SIGMA

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Counter Point: THERE IS NOTHING NEW TO SIX SIGMA – SOME NEW ASPECTS

• Providing a “roadmap” to help practitioners properly link and integrate the tools into an overall approach to scientific inquiry

• Scoping projects to be completed in 3-4 months, to provide management with timely results

• Focus on preventing problem reoccurrence – the Control Phase

• Providing a formal infrastructure – dedicated roles, budgets, project selection and review, etc.

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• The step-by-step processes of Six Sigma are cumbersome and slow down process• The hierarchy of champions, Master Black Belts, etc. is undemocratic and establishes a caste system

Point: SIX SIGMA ADDS BUREAUCRACY

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COUNTERPOINT: SIX SIGMA ADDS BUREAUCRACY So what? Six Sigma works• Even Jack Welch admitted Six Sigma adds

some unavoidable bureaucracy • Doing it right the first time is faster in the

long run • Formal infrastructure is important and a

success factor• Hierarchy gives responsibility to most

qualified• In age of specialization, we can’t all be

experts on everything• MBB provides boot camp for aspiring

managers • Emphasis on hierarchy is declining

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• Emphasis on manufacturing• Focus on addressing individual CTQ’s, instead of entire system • Selectivity of tools (those with which developers were enamored)• Emphasis on data analysis over data acquisition

Point: OTHER FAULTS OF SIX SIGMA

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- Improve existing products - Improve new products: DFSS (and Design for Reliability) - Improve business processes and transactions - Help customers directly

Counter Point: OTHER FLAWS OF SIX SIGMA Evolution of Six Sigma for Manufactured Products

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Counter Point: OTHER FLAWS OF SIX SIGMAAsserted Flaws are being Addressed

• Greater recognition of need for “multivariate Six Sigma”

• Tools like QFD are providing systems focus• Tools found useful in applications added, e.g.,

simulation, life data analysis, mistake proofing• Tools training becoming applications-area focused,

e.g., mixture experiments for chemists, survey sampling for marketeers

• Appreciation of importance of data acquisition• Recognition not all projects need Six Sigma,

e.g.,equipment installation, upgrading computer network, cold fusion

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Point: SIX SIGMA IS ALREADY WANING

• Management continues to demand “something new.”

• Number of newspaper and magazine articles mentioning Six Sigma dropped off about 10% in 2003 from 1999-2002 peak (Source:www.google.com)

• 5% drop in number technical articles from peak• Lean is replacing Six Sigma as top attention-

getter

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Point: SIX SIGMA IS ALREADY WANING: GE• Precipitous drop in number of Six Sigma

mentions in GE Annual Report▪ 1995: 0▪ 1996: 37▪ 1997: 91▪ 1998: 64▪ 1999: 53▪ 2000: 49▪ 2001: 69▪ 2002: 9▪ 2003: 4

• Less specific in quantifying Six Sigma savings

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Counter Point: SIX SIGMA IS ALREADY WANING

• Six Sigma continues to grow▪ GE is not the world▪ Don’t believe everything you read on the Internet

• Books with 6 Sigma in Title▪ Before 2000: 10▪ 2000: 9▪ 2001: 25▪ 2002: 35▪ 2003: 41▪ 2004 (to date): 25(Source:www.isixsigma.com/books/default.asp)

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Counter Point: SIX SIGMA IS ALREADY WANING—More Statistics

• Members Six Sigma Forum: ▪ May 2002: 10,598 (first year)▪ May 2003: 16, 506▪ May 2004: 20,587

• Six Sigma Forum Magazine▪ Ad sales: Increased from 9 to 14 pages per issue ▪ Articles: Backlog increasing

• Bill Tony, Publisher ASQ Quality Press: “Customer interest in Six Sigma continues to grow. We can’t find enough SS titles based on customer demand—including those not quality practitioners. We (also) hear that SS is passé. We just aren’t seeing it.”

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Counterpoint: SIX SIGMA IS ALREADY WANING-Evolution

• Growth of Six Sigma beyond manufacturing businesses▪ Financial Services▪ Health Care

• What’s next:▪ Government, education, academia, etc.▪ Globalization▪ Adaptation by smaller companies

• Integration with Lean strategies (see November 2002, Six Sigma Forum Magazine)

Challenge: Quantifying savings in move from short-term (DMAIC) to longer term (DMADV) applications.

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SUMMARY

• Godfrey: “Of course, there will be something after Six Sigma…but does this really mean we (should) wait and not use the best tools available now?”

• Six Sigma has become a more silent partner in GE and other companies where it flourished early

• Six Sigma is on the upswing in many new application areas (e.g.,financial, health services) and arenas (e.g., globalization, small businesses)

• Six Sigma continues to evolve▪ Basic concepts are sound--will continue to provide

improvements▪ New approaches provide healthy refurbishment▪ Will be important part of whatever comes next

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For copies of these slides contact gerryhahn@yahoo.com,or,hoerl@crd.ge.com

Now its your turn:• Is (or was) Six Sigma a fad? • Do you agree with Gerry, Angie or

Martha?• What does the future behold for Six

Sigma, quality and us?• What are your major take-aways from

this conference?• Anything else (within reason)• And big thanks to Blan et al

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SOME OF OUR CONFERENCE TAKE-AWAYS• Some key ideas

▪ Processes▪ Voice of customers▪ Globalization▪ Computers, computers, computers▪ Super-saturation▪ Examine Six Sigma critically

• And a few further impressions▪ Almost all talks from computers▪ Applaud at beginning of talk▪ How times have changed: Applications

paper in Annals (Box and Hunter, 1957)▪ Listen to Yogi Berra