six sigma intelligence

Six Sigma Intelligence

White Paper

! How Organizations Such As General Electric Use Business Intelligence For Faster, More Effective Six Sigma Projects

Author: Timo Elliott. [email protected] Audience: This paper is intended for business-line managers and executives who wish to

understand how business intelligence (BI) can be used to further Six Sigma projects.

Business Objects • Six Sigma Intelligence i

Contents

Executive Summary ...................................................................................................... iiiiiiii

Introduction to Six Sigma Intelligence.....................................................................1

Preparing for Six Sigma Intelligence

Step 1: Customer Profiling .............................................................................4

Step 2: Boundaryless Cooperation ............................................................. 7777

Implementing Six Sigma Intelligence

Step 3: Define.................................................................................................. 10

Step 4: Measure.............................................................................................. 13

Step 5: Analyze............................................................................................... 18

Step 6: Improve............................................................................................... 22

Step 7: Control ................................................................................................ 24

Creating a Six Sigma Intelligent Organization

Step 8: Design for Six Sigma ...................................................................... 27

About Business Objects............................................................................................ 31

Executive Summary

ii Business Objects • Six Sigma Intelligence

Six Sigma provides a systematic way of improving business processes based on customer needs and factual analysis of company processes. Business Intelligence (BI) is technology devoted to accessing, analyzing and sharing business information. Real-life organizations like GE are combining these two technologies in the form of “six sigma intelligence,” a framework for using information technology to pick Six Sigma projects, get results more efficiently, and ensure their long-term success. Specifically, BI systems from companies such as Business Objects help organization-wide implementations of Six Sigma in the following ways:

! Steps 1-2: More Effective Preparation

Many organizations struggle with the choice of which Six Sigma projects to implement. BI helps organizations prepare for the implementation of projects in the following ways:

• Customer profiling. The use of BI helps choose which are the most important customer segments projects should be focused on, and understand what drives the behavior of those customers, prior to implementing Six Sigma projects.

• Boundaryless cooperation. BI helps ensures that members of the “extended organization”—companies, their partners, suppliers, and customers—cooperate on the highest-return Six Sigma projects, all working from the same data.

! Steps 3-7: Faster Implementation

In today’s fast-moving environments, Six Sigma projects need to be implemented quickly and efficiently. BI is essential for speeding up each phase of change management such as “define, measure, analyze, improve, and control” (DMAIC).

• Define. BI helps choose which process to improve, based on costs, the “total cost of quality” and other factors.

• Measure. BI helps collect and compare different measures to clearly illustrate the existing situation and set achievable goals for the project.

• Analyze. BI is essential for analyzing the causes of the observed problems and suggesting possible areas for improvement.

• Improve. BI helps awareness and acceptance by communicating improvements and project reports to the rest of the organization.

• Control. BI ensures that any exceptions to the new processes are detected, communicated, and acted upon.

Business Objects • Six Sigma Intelligence iii

! Step 8: Increased Long-Term Success

Long-term “design for Six Sigma” initiatives require broad employee access to a wide range of metrics across their organization. BI is essential for collecting and understanding these measures, providing an integrated view of the business across different processes, and a single view of the customer across different divisions. BI can also be applied to the Six Sigma process itself, to compare the success of different projects across the organization, to determine the factors that lead to that success, and to share best practices.

iv Business Objects • Six Sigma Intelligence

Introduction To Six Sigma Intelligence

Business Objects • Six Sigma Intelligence 1

! Six Sigma

Six Sigma is a disciplined, data-driven approach and methodology for eliminating defects (driving towards six standard deviations between the mean and the nearest specification limit) in any process, product, or service. Pioneered by companies like GE and Motorola, Six Sigma has its roots in quality management initiatives and like them, is disciplined in its use of facts and statistical analysis to achieve no more than 3.4 defects per million opportunities. However, Six Sigma is not “just another quality initiative.” It emphasizes the need to start with processes and defects from a customer’s point of view, and outlines a management organization for effectively implementing change. A Six Sigma initiative is typically led by an Executive Champion, in charge of ensuring that the initiative gets the support it needs—GE’s Jack Welch, for example, was known as an unwavering champion of Six Sigma. Projects are led by “Black Belts,” middle managers who leave their roles to spend one to two years exclusively implementing Six Sigma Projects. They undergo long weeks of training, and typically receive bonuses based on the savings they generate for the organization. They are aided in their projects by a team of “Green Belts” chosen from different functional areas according to the project. Once Black Belts have successfully implemented several projects, they may become “Master Black Belts” who help choose and coach Six Sigma projects throughout the organization. According to the Six Sigma Academy, Black Belts save companies approximately $230,000 per project and can complete four to 6 projects per year. General Electric, one of the most successful companies implementing Six Sigma, has estimated benefits on the order of $10 billion during the first five years of implementation.

! Business Intelligence

Business Intelligence (BI) refers to the use of technology to collect and effectively use information to improve business effectiveness. An ideal BI system gives the employees, partners, and suppliers of an organization easy access to all the information they need to effectively carry out their roles, and the ability to analyze and easily share this information with others. With its roots in inflexible early databases and “executive information systems,” BI has evolved to become a powerful set of technologies suitable for different types of users and information analysis needs.

2 Business Objects • Six Sigma Intelligence

Today, only 19% percent of companies say their employees have all the data they need to make informed decisions1. Yet according to a 2000 International Data Corporation study of 65 companies, the mean return on a BI investment was greater than 400% over 2.3 years. Figures like these have meant that BI continues to be an area targeted for increased IT spending in the years to come.2

! Six Sigma Intelligence

“Six Sigma intelligence” is the combined use of Six Sigma and business intelligence to further the goals of the organization, by picking Six Sigma projects more effectively, achieving results faster, and ensuring their long-term success through exception reporting. The rest of this document outlines the specific benefits to organizations that use Six Sigma intelligence.

! Example: General Electric

A commitment to quality and customer focus has been the linchpin of GE's success, but several key technology projects have also helped. In 2002, GE is investing $300 million in quality training and systems that measure Six Sigma's effectiveness by capturing metrics, including frequency and type of manufacturing defects, for an expected return of $400 million to $500 million in savings. GE's Six Sigma quality program isn't unique, but GE's ability to successfully use information technology to measure its quality control progress and to tighten its ties with customers has been unparalleled. GE Chairman John F. Welch's commitment to the quality program and his understanding of IT's role in it have helped separate GE from the rest of the pack. GE's chief executive, Jeffrey Immelt, has continued the tradition. Immelt was introduced to BI systems when he ran GE's medical instruments business, using them to monitor the cost, maintenance and performance of his X-ray, MRI and ultrasound machines. Soon after he was named to the top job in November 2000, Immelt decreed that everyone throughout GE use cockpits. And now, for example, GE Capital's “electronic boardroom” allows executives to track asset and revenue results from their insurance and financing businesses and to scrutinize the profitability of specific customers.

1 HP-Business Objects study, 2001 2 AT Kearny and Line56 Research, 2001


More examples of exactly how GE organizations have been implementing BI can be found in later chapters of this document.

Step 1: Customer Profiling


One of the key benefits of Six Sigma is that it enhances value to customers. When GE began its Six Sigma effort, executives admitted that quality of the company’s products was not what it should be. Though its quality was perhaps better than that of its competitors, Jack Welch stated “We want to make our quality so special, so valuable to our customers, so important to their success that our products become the only real value choice.”3 The focus on customers at the heart of Six Sigma means learning what value means to customers (and prospective customers) and planning how to deliver it to them profitably. But one of the discoveries often admitted to by business leaders and managers, after embarking on Six Sigma, is that, to quote one executive, “We really didn’t understand our customers very well.”4 BI helps you understand your customers through segmentation and profiling.

! Profile Customers

Looking more carefully at the question “who are our customers?” can bring a real awakening to a business. A common discovery, for example, is that a small proportion of the customers contributes the lion’s share of revenues. Often, too, it’s found that the costs of supporting some customers turn out to make them unprofitable. In this case, companies either need to align their product offerings, services, and features—and costs—with the “profile” of each group, or make the tough decision to abandon a customer segment. Getting good customer input on your company’s needs and requirements may be the most challenging aspect of Six Sigma. BI can help avoid the “squeaky wheel” syndrome, where projects are selected on the basis of the loudest customer complaints—when it may be that those customers are not the most important. Most companies have basic customer reporting systems, but lack the ability to extract the full value of the stored data through segmentation and profiling. Some of the questions that more advanced BI analytics let you answer include:

• Who are our happiest customers? What characteristics differentiate them from our unhappy customers?

• Which are our most profitable customers? Are they typically also our happiest customers?

3 “Jack Welsh and the GE Way: Management Insights and Leadership Secrets of the Legendary CEO”. New York: McGraw-Hill, 1999, p.207 4 “The Six Sigma Way”. McGraw-Hill


• Which of last year’s top 50 customers are no longer in the top 50 this year? What is different about them from the customers that are still in the top 50?

• What is the rate of customer turnover? Is it increasing or decreasing? Why?

• Which customer segments have the lowest ratio of repeat business? How do their demographics compare to the customers we try to target with our marketing?

• How do our customers compare to our competitor’s customers?

• Are the needs of our prospects the same as the needs of our customers?

! Example: GE Capital

Founded in 1943, GE Capital offers a wide range of financial products and services to consumers and businesses. GE Capital has 126,000 employees and accounts for 40 percent of all GE sales. Previously, GE Capital’s employees only had access to information through an unwieldy combination of mainframe systems and spreadsheets, and experienced long delays in accessing information. Now, BI has allowed GE Capital to provide its employees with detailed, up-to-date, weekly, monthly, and annual reports on customer trends, improving customer retention and identifying upsell opportunities. Users in the finance, accounting, marketing and

!!!! Figure 1: Today’s BI applications can profile customers using sophisticated techniques such as tracking movement between segments


customer service departments are now capable of producing and customizing reports using a point-and-click web interface, saving a considerable amount of time and resources compared to previous systems. In particular, GE Capital’s customer service department uses BI to track and analyze customers’ online viewing behavior, refining the company’s ability to meet individual needs and thereby improving customer satisfaction.

Step 2: Boundaryless Cooperation


Historically, the Six Sigma methodology has been developed for companies selling products or services they create in-house. But today’s market infrastructure has been changing dramatically, to become a series of interconnected businesses dedicated to resolving a particular customer need.

! Analyze Across Company Boundaries

To be successful with Six Sigma, you can no longer focus only on measuring, analyzing and improving those processes operating entirely within your business. Today’s organizations must take on Six Sigma challenges across the “extended organization” of suppliers, partners and customer organizations, and BI helps break down barriers by letting organizations share information effectively along the entire supply chain.

! Share “Voice of Customer” Data

BI helps companies share performance and critical “voice of customer” information up and down the supply chain. Deprived of this information, single-business projects risk underestimating the “costs of poor quality.” This is because typically, the organization that is liable to the final customer for a product’s quality, quantity and delivery time has the highest costs of poor quality. But to get a true view of the consequences of defects in their processes, companies higher up the supply chain also need to take account of these costs, by “backtracking” them up the supply chain.

For example, if an appliance manufacturer considers its “customers” to be large retail chains, its Six Sigma project is likely to be one focused on satisfying the needs of the retail chains, which may involve process efficiencies and incremental cost improvements.

!!!! Figure 2: BI allows you to share high-level customer, inventory, and delivery information up and down the supply chain.


But the process may overlook some product design defect that is causing considerable costs to the final customer, and that are indirectly responsible for lower-than-expected demand and higher costs. For example, by factoring in the needs of the final retail customer with information about warranty returns, the manufacturer may find that a Six Sigma project focused on reducing the final customer complaints leads to a much higher rate of return than a project focused on the needs of the retail chains.

! Example: GE Medical Systems

GE Medical Systems (GEMS) is a $5 billion global manufacturer of diagnostic imaging equipment and services employing more than 19,000 people worldwide. For more than 100 years healthcare providers have relied on GEMS to provide high-quality imaging technology, services and productivity solutions. With more and more hospitals depending on advanced medical technology such as x-ray equipment, ultrasound machines, and MRI technology, keeping that equipment working flawlessly with as much “uptime” as possible has become extremely critical. Using BI from Business Objects, GEMS developed an innovative system that allows their customers to evaluate equipment performance and other measurements. GEMS developed the application as part of GE's Six Sigma quality program to demonstrate the tangible quality and service improvements they are delivering to their customers. Referred to as “customer dashboards,” the application uses BI to measure key business performance indicators such as product performance, customer satisfaction, and cost allocations in order to show how they affect a customer's business. Over one-thousand professionals throughout the GEMS sales force, as well as their customers, use BI to track these metrics as they work toward fulfilling organizational goals such as increasing revenues, improving patient care, and reducing operational costs. The customer dashboards have been so successful in improving customer service that GE Medical is in the midst of rolling out a web-based version of the dashboards for its Customer Teams. Prior to using the new system, similar metrics were pulled off the GE Medical mainframe and shipped to the customer each quarter, but the reports were one-dimensional, and did not allow for any customization.


The new system allows customers to look at information by product or by categories such as uptime, and lets them analyze the information in any way they want. Each quarter, members of GE Medical's Customer Care Teams sit down with 60-100 strategic customers—primarily administrators at major hospital groups—to review key issues and concerns. The centerpiece of the discussion is the customer dashboard, a printout of the performance metrics that the hospital selected as most relevant to them, and how those measurements fared over the last quarter. Narrowed down from GE Medical's master list of 18 metrics, these statistics can cover everything from “uptime” by item of equipment, to preventative maintenance status of equipment, to mean time between failures. These measurements are used by GE Medical's Customer Care Team members to help structure and fine-tune customer service discussions. Often, customer expectations about equipment need to be adjusted, as in the case of a radiology department that expected a tube for a CT machine to run 500,000 times when the technology only allows for 300,000 uses. GE Customer Care Team members can review product requirements and standards using the dashboard and explain what is realistic. An additional benefit to using the customer dashboards is that GE Medical's Customer Care Teams get regular updates on the metrics as the underlying data is refreshed. This allows them to develop better relationships with customers as they track metrics, and they can alert customers about any potential problems prior to their quarterly review sessions. Overall, the new system engages the customer at the level of performance metrics. By using dashboards to help explain products in more concrete detail, GE Medical's Customer Care Teams can get a better understanding of how their hospital customers use equipment and can help them make necessary improvements.

Step 3: Define


The first step in implementing a Six Sigma project is to define, within the broad scope of identified customer needs, what the detailed requirements are for products and services, and what the customers’ expectations are for the related processes. Business Intelligence helps increase the speed and efficiency of this phase by better prioritization of projects and processes.

! Prioritize Project Selection

Project selection is often cited as the most critical, yet most commonly mishandled activity in launching Six Sigma. Without good access to process or customer data, business leaders may choose their projects based on guesses and assumptions. That means you may well end up targeting issues that are annoying, but not really critical to the business or its customers. The Black Belts in charge of the project attempt to find the “best” process to focus on, i.e.

• One that has the highest ROI

• That is feasible, in terms of budget and resource constraints

• And that can be carried out in a reasonable time—e.g. the duration of a Black Belt project is typically 3 to 5 months

In the real world there are often many candidates for process improvement, and the process of prioritization can be more difficult than it sounds, since nothing ever stays still, with constant changes in supplier and customer organizations or priorities, internal

!!!! Figure 3: BI allows you to prioritize project selection based on detailed customer metrics.


company changes, and new technologies—all this even during the relatively short life of a project. Well-selected improvement projects equal better, faster implementations, and BI can help ensure that the project goals stay relevant even in a fast-changing environment. BI helps by allowing you to ask the following types of questions:

• Where are we falling short in meeting customer needs?

• Is the problem, issue, or opportunity getting bigger or smaller over time? What will happen if we do nothing?

• Which parts of the process involve the highest costs? Where are the costs of poor quality (COPQ) increasing?

• What will the short-term dollar gain likely be? Long-term? How do these compare to the projected project costs?

• Where are we behind our competitors?

• What major delays slow down our process?

• Where is there a high volume of defects and/or rework?

• What do the customer surveys say is most “critical to quality”? What are the most common complaints?

! Determine What to Measure

BI helps gather and analyze customer input from multiple sources, such as surveys, customer scorecards, market research and formal complaint systems. Shifting demands, based on “new data” about the customer and new marketing priorities, often plague companies’ development initiatives. By using BI to establish performance standards based on actual customer input, you can resist unnecessary change and predict customer satisfaction based on those measures.

! Example: Penske Logistics (GE Capital)

Penske Logistics is part of a Penske Truck Leasing, a joint venture of Penske Corporation and GE Capital. Penske Truck Leasing is a global transportation services provider with annual revenues of approximately $3.4 billion. The company operates approximately 208,000 trucks and serves customers from more than 700 locations in the United States, Canada and Mexico. Penske Logistics provides global solutions for transportation


management, distribution management and integrated logistics. Located across three continents, Penske provides technology, engineering and operational expertise to fulfill each customer’s unique supply chain needs. Information from Penske Logistics’ 2,500 truck fleet is relayed via satellite in real-time to a centralized database. Over a thousand Penske Logistics’ employees then use BI from Business Objects to analyze driver performance and logistics coordination. By analyzing these reports the company identifies inefficient delivery routes and improves operational efficiency. In addition, Penske Logistics distributes many employee-created reports externally, ensuring the smooth dissemination of information across the “extended enterprise”. Many of Penske’s customers are just-in-time operations that need to get materials to their manufacturing plants or finished goods from their manufacturing plants to distribution centers or from distribution centers out to their customers. They expect Penske Logistics' services to work like clockwork—and if they don’t, the result may be a shut down plant, or increased handling costs. The application generates reports that generally tell customers what services Penske Logistics provided, how it provided those services, and how well the company performed in providing the services. In particular, the reports can tell Penske Logistics' managers and its customers the status and results of its shipping operations, including what was shipped, when it departed, when it arrived, and whether it arrived on time. For example, customers can have online access to reports that show an on-time performance level of 3.5 Sigma, and allow them to drill into where in the supply chain problems occurred (a delayed delivery because the customer’s loading bay wasn’t ready, for example), so they can be fixed. These reports used to cost the technical teams within Penske up to $10,000 to create, and the process could take weeks. Now managers are able to create reports themselves, in less than 15 minutes. One of these showed that Penske made 1,200 redeliveries to a customer in just one month, at $75 a run. This could add up to redelivery costs of $1 million a year, and armed with BI, they plan to shrink those losses to about $9,000.

Step 4: Measure


Six Sigma is based on the concept of “management by fact,” and measurement is the second key step in implementing a Six Sigma project. Despite the attention paid in recent years to better use of information, many business decisions are still based on opinions and assumptions. Measurement is at the heart of a good, customer-focused process management system and any program directed at continuous improvement. The Six Sigma focus on customers and performance standards ultimately shows up in the form of key metrics that assess your ability to meet your customers' needs and business objectives. BI helps by clarifying what measures are key to gauging business performance.

! Gather Information From Multiple Sources

The most highly effective Six Sigma projects tend to solve issues that cut across traditional business areas. But in today’s world of complex, interacting data systems, with vital process information stored in a combination of legacy mainframes, enterprise resource planning systems, customer relationship management systems, and sales force automation systems, the hardest part of measurement is often getting all the data about a particular process in one place. This gets even harder when the project, as it should do, encompasses the “extended organization,” including information from partners and suppliers.

In most cases, where large amounts of data must be correlated, the need for an organized data collection and storage infrastructure is inescapable. New integrated BI systems include data integration technology that extracts information from various data systems and combines it to create “data marts” or “data warehouses”— data sources designed explicitly for the needs of business user questions.

!!!! Figure 4: Delivery cycle times are just one example of the types of measure that may require the integration of data from multiple different sources.


In addition, BI allows Six Sigma teams to flexibly integrate measurement information on the fly, combining information from the data warehouse with other data sources such as spreadsheets or web information from industry sites.

! Provide “SMART” Measurements

Developing effective process metrics may appear easy at first glance, but many have fallen into common traps that BI can help you avoid. Examples of common pitfalls are:

• Developing metrics for which you cannot collect accurate or complete data.

• Developing metrics that measure the right thing, but cause people to act in a way contrary to the best interest of the business to simply "make their numbers."

• Developing so many metrics that you create excessive overhead and red tape.

• Developing metrics that are complex and difficult to explain to others. To avoid these problems, measurements should be Specific, Measurable, Actionable, Relevant, and Timely or SMART:

• Specific—measure the problem as directly as possible. For example, direct customer feedback is better than a proxy such as the number of customer complaints.

• Measurable—collect accurate and complete data.

• Actionable—use easy-to-understand metrics, and be clear which direction is “good” and which is “bad.”

• Relevant—don’t measure things that are not important.

• Timely—use metrics based on data that will be available when you need it. Metrics should be simple. If they require a lot of explanation and definition, then collecting data, and translating that data into actions becomes more difficult. Easy-to-understand metrics are easier to sell, and have a stronger impact on the process and the people who us it. Metrics fall into two main types:

• Performance metrics—high-level measures of your overall performance.

• Diagnostic metrics—measures that ascertain why a process is not performing up to expectations.

In many ways, effective measurement determines the success of the project—notably because your people will take action to achieve what you, by the metric, have told them


is important. If the metric has not been well chosen, the action they take may surprise you—it may be shortsighted and not at all what you had intended. To avoid these problems, you must ask: “Will this metric drive the desired behavior?”, “What type of behavior might this metric drive?,” and “Will it help you move your business to where it needs to be in the months and years ahead?”. A good BI system can help you predict the effect of your measures, based on employee behavior in the past.

! Measure Cost of Poor Quality

The “cost of poor quality” (COPQ) is a key example of a SMART measure, and is an important measurement step in prioritizing change. Here’s why: if you have two processes both performing at 3.5 sigma, their defect-based performance seemingly is equal. However, adding up the dollars lost to defects in both processes, you may find the bottom-line impact of one process far higher than the other. Using BI to help you collect, calculate and communicate COPQ numbers can help “sell” the Six Sigma project within the organization. They are often more meaningful to the business leaders or others having no Six Sigma background because, unlike Sigma or defects per million opportunities, they speak a language almost everyone understands: money. COPQ measures can represent a very useful way of strengthening consensus for improvement and of helping you to select problems with clear bottom-line benefits. If you can include reasonable dollar estimates on the external impact of problems—for example, quantify the volume of business lost for every point decrease in a customer satisfaction rating—COPQ can make an even stronger case for customer-directed improvement.

! Ensure Data Consistency And Validity

One of the key issues faced by teams implementing Six Sigma is the consistency of data—does “customer” in one system mean the same thing as “customer” in another? BI systems—especially ones that abstract from technical complexity of the underlying data systems by hiding them behind a user-friendly “metadata” layer—help make sure that the metrics in different systems are comparable. Using these systems, even if the data is stored in different ways in different systems, end-users see the “translated” measures that look the same whichever application they come from. Data quality is often another huge issue when it comes to measurement—BI can help data quality issues by making it easier for users to spot possible errors and data outliers,


through scatter charts and other techniques. BI also helps ensure that data used for analysis has meaning (i.e., can be shown to have more significance than just random movements.)

! Example: GE Capital Insurance Services

Companies in the insurance industry live and die by the information they get. Easy access to company information and the ability to drill into that information is critical to making good business decisions. At Denver-based GE Capital Insurance Services (GECIS), senior management wanted more facts to improve decision-making and started asking some reasonable questions. But at the time, the company's IT infrastructure just wasn't equipped to provide the required answers. To get those answers, GECIS turned to a BI solution using Sybase and Business Objects. GECIS, supports the Dealer Services group, which markets and services extended warranty contracts for automobiles. Other than the actual carmakers themselves, GECIS is the largest independent extended warranty dealer in the country. In simple terms, insurance companies collect premiums and pay claims. To ensure that claims are less than premiums, loss ratio forecasting is critical to ensuring overall profitability. Using legacy systems, which capture data regarding the various insurance or warranty plans offered, the company can track the profitability of a particular plan. But to maximize profits and maintain competitiveness, the company needed answers about loss ratios and risk analysis for a particular year, make, or model of a vehicle-or even for a particular state or the profitability of contracts sold by a particular dealer. GECIS uses the new BI system to provide those answers. Using the system, GECIS has more than met its goals. Business users are now able to access performance information without having to turn to the IT department each time they want a report. Where it used to take months before users got access to data that was fairly limited in scope, those answers are now received in minutes, and are fully interactive — the results from one query can spur the user to ask new questions based on the previous query's response. Access to information, from a cultural and priority perspective, is where the entire company is focused today—meeting senior management's Six Sigma directives of decisions based on facts drawn from reliable data. In orders of magnitude, 1 percent of loss ratio is enough to cover the IT budget for a year or two—in just a few months, opportunities were identified that improved the way business was done at GECIS, and were enough to cover the investment in the new system.


Overall, the new system enables the risk management and pricing department to understand the dynamics of product sales to an unprecedented depth, which adds to their ability to make better decisions, which increases value to the dealers and customers by offering the most value for the dollar in the warranty market—which in turn drives the GECIS bottom line

Step 5: Analyze


Analysis is the third step of implementing a Six Sigma project. BI, almost by definition, helps analyze the data collected to determine root causes of defects and opportunities for improvement. Various specialized techniques exist to identify sources of variation and the underlying causes of the observed problems, including sampling, hypothesis and testing. BI is helpful in the following ways:

! Get a Quick Overview of The Problem

Most organizations that implement Six Sigma use specialized desktop statistics tools—for example the desktop statistics product Minitab—but these solutions often involve awkward manual movement of information between different systems. A general BI infrastructure is essential for teams to understand the problem landscape:

• What types or categories of problems are more common? What’s different about the most common types?

• Are there locations (regions, places on the item itself) where the problem is greater? How are those places where the problem occurs more unusual?

• What are the times, days, weeks, or conditions when the problem is most prevalent? What’s going on that’s unique during those times?

• What factors or variables change as the problem changes (or “correlate” with the problem)?

! Analyze the Problem In-depth

Different BI techniques are adapted for different types of problem analysis. Data mining and statistics techniques are typically designed for power users, while other techniques can be used by all business decision makers. Here is just a small fraction of some of the possible types of analysis provided by a good BI solution: Discover The Range And Depth Of Variation Histograms are used to show the range and depth of variation in a group of data. You can use them to:

• See the range and distribution of factors (e.g. weights for each shipment, dollars spent per purchase, size of each hole, reboot time for each computer)

• See the variation and performance around a customer specification/requirement (e.g. size, cycle time, temperature, cost)

• See how many defects occur on each unit in a group of defective items, where there are multiple opportunities for error


• See how key “count” characteristics in a group or population are distributed (e.g. customers by number of purchases per year, suppliers by score on our quality audit)

Prioritize Possible Causes Pareto charts are the visual equivalent of the “80/20” rule—they show what factors make up the majority of the problems observed. They can be used to:

• Sort problem data by region, and find which region has the most problems.

• Compare defect data by type, and see which defect is most common.

• Compare problems by day of the week (or month, or time of day), to see during which period the problems occur most often.

View Trends Over Time A time series shows the variation in a process, product, or other factor over time—a very valuable tool for understanding processes, which by nature are ever-changing. You can use them to:

• Detect the pattern of variation in a process or product over time. For example, how much difference there is in test data from day to day; or how much variation occurs in process cycle time from item to item.

• Identify possible timing patterns in variation. For example, is there a weekly cycle? Do certain events seem to match changes in the process?

• See how a process or key factor is responding to change. For example, how process improvements are impacting performance; how the new phone system is affecting caller hold times.

!!!! Figure 5: Pareto charts are just one of the many types of analysis that are possible with today’s BI analytics products.


Discover Correlations Between Factors Scatter plots show the link or correlation between two factors. They show potential casual relationships between one factor and another—e.g. sunshine and sunny days. You can use them to:

• See the degree to which one factor’s increase in value or performance is linked to the increase or decrease in another.

• Test the relationship between a suspected root cause of a problem and the level of the problem (defects, costs, etc.)

Determine Statistical Validity When you measure and analyze a process or product, it’s often possible to draw valid conclusions simply by looking at the data. There are times, however, when it’s not obvious. In these instances, we can apply more rigorous statistical analysis to confirm trends or patterns in the data. You can use them to:

• Confirm a problem or meaningful change in performance.

• Check the validity of data.

• Determine the type of pattern or “distribution” in a group of continuous data.

• Develop a root-cause hypothesis based on patterns and differences.

• Validate or disprove root-cause hypotheses. Analysis Using Specialized Techniques Apart from the most common types of analysis above, many other types of analysis and charting are possible, including Kiviat diagrams, range comparisons, correlation plots, trending and seasonality, deviation from moving averages, set comparisons, etc.

! Carry Out Interactive Analysis

If the information systems department is required to step in each time a report needs to be analyzed, the project will face long delays. The Six Sigma teams need to be able to easily collect and analyze information, and drill down for more detail. For example, if the defects are appearing only during a particular time period, they need to be able to quickly and easily find out what diagnostic metrics also change within that period.


! Example: GE Card Services

GE Card Services is a leader in providing credit services to retailers and consumers. Formed in 1932 as a provider of consumer financing for GE Appliances, Card Services provides private label credit cards, commercial programs and card-related financial services for hundreds of retailers and manufactures across North America. Card Services also issues and services corporate cards for commercial customers, including purchasing, travel and fleet vehicle cards. Card Services offers clients a full range of operational, financial and analytical support, and develops customized marketing programs designed to increase sales and customer loyalty. GE Card Services has 12,000 employees, serves over 70 million cardholders, and has over $18 billion in total assets. GE Card Services uses BI to analyze customer acquisition and management strategies, and profile customer segments for risk and fraud. Key initiatives have included:

• Analysis of optimal tiering for late fees, minimum payments and repayment terms for different customer profiles.

• Analysis of balance transfer marketing campaigns, based on modeled response rates, forecast fees and late charges, and loss rates by risk segment.

• Cross business customer analysis, to determine telemarketing initiatives and vendor settlement processes.

Step 6: Improve


Once you have diagnosed the problems, you can carry out the fourth step of the Six Sigma implementation methodology—improving the target process by designing creative solutions to fix and prevent problems, and developing an implementation plan. While each Six Sigma project team will ultimately need to physically implement corrective actions, BI can make your improvement process more effective and more readily adopted throughout the enterprise.

! Monitor and Communicate The implementation Plan

You can use BI techniques such as trend charts to track your improvement progress. When you see how you are doing, you're likely to ask, “Am I making progress fast enough?” and “Am I concentrating on the right objectives?” BI lets you analyze the progress trends and other factors Data only becomes valuable when and if it is analyzed and acted upon. Even in organizations that already have sophisticated and effective customer data-gathering systems, there remains the problem of getting executives and managers to pay attention to the data. People often resist the new processes you try to implement. In many cases, this is because they don’t understand the benefits—according to a CFO Magazine survey5, more than 54 percent of executives said they have no consistent, reliable way of measuring reengineering benefits. One factor in this is that most companies are not very effective at internally communicating customer requirements—when you can effectively get employees to understand this information, you’ve laid the groundwork for change to occur.

! Manage Costs and Project Effectiveness

As with any other successful management initiative, Six Sigma project expense information has to be tracked to ensure that the gains being made are cost-effective. BI helps analyze and optimize the metrics of your project, such as direct and indirect payroll costs, costs and the effectiveness of internal training programs

5 CFO Magazine, May 1995


! Example: GE Capital Consumer Financial Services

GE Capital Consumer Financial Services (GECFS) used BI for a Six Sigma project in their collections department, a $4 billion bankcard family of portfolios The analysis phase of the project looked at the drivers of collection performance trends, through loss updates, scorecards and delinquency reports. Key metrics were determined through “voice of the customer” surveys, and forecasts were established for delinquency, credit and bankruptcy loss. As part of the improvement process, guides were created to help the understanding and updating of reports. The Six Sigma team partnered with risk, operations and finance managers to forecast and establish collection performance targets. Daily, weekly and monthly reports were then used to track GEFS-Collection’s financial and capacity performance, which in turn drove incentive pay for 3,000 collectors across seven domestic and off-shore sites. The reporting, originally driven from a variety of tools including Excel, was transitioned to a system including Oracle, SAS and Business Objects, resulting in a 60% reduction of daily reporting cycle time. .

Step 7: Control


After you’ve implemented the new process, you need to institutionalize the improvements through the fifth step of the Six Sigma methodology — modification of systems and structures to control the process. “Control” in this sense means keeping a process operating within a predictable range of variation. The objective is to maintain the stable, consistently good performance of a process. BI is essential to this step of the process in order to:

! Detect Deviations From the New Process

This usually involves the notion of statistical process controls—to figure out whether a process is statistically “in control” or “out of control,” you begin by measuring a process over time and then examining the variation in the data you’ve gathered. With enough data you can calculate what are called “control limits,” the first step in checking to see how well the process is working. For example, imagine you’re managing a transportation company, and you want to know how much variation exists in the number of miles per gallon achieved by the drivers. The first step is to gather the data. After, say, a month of collecting data, you plot the results on a trend chart. Next you use that data to calculate the upper and lower control limits and you add those to your chart along with a line indicating the average of mean. You now have a control chart.

If you continue to gather data on miles per gallon, the control chart will give you the ability not only to track changes, but also to be able to see if and when the process is “out of control,” or operating in a way that is no longer predictable.

!!!! Figure 6: Control charts show how well the new process is working, and can be used to trigger alerts if excessive variability is detected.


! Communicate Information Effectively

A key to the value of statistical process controls is to get early warnings of problems or opportunities, so it’s important to gather, plot, and review data promptly. If your data collection systems and reporting take days or weeks to create reports, or if no one looks at them, then you have been wasting resources. Information should be prioritized carefully for your audiences—one or two really meaningful control charts may be more useful than having 10 or 15 mildly interesting ones that people soon stop looking at.

! Continue to Check Against Customer Requirements

There are two different types of “limits” in Six Sigma. First, control limits that are calculated from actual process data, which can change as the process performance changes over time. Second, specification limits that come from the customer which will change as the customers’ requirements change. It follows that having “controlled” performance is not necessarily the same thing as “good” performance. For example, a computer repair shop decides to measure its turnaround time on routine repairs. It creates a chart showing a process under perfect control, consistently doing repairs in less than five days. But the customer wants the jobs done in two, and so gives the work to a competitor. BI lets you compare customer behavior with the controlled process to see if changes to control limits need to be made.

!!!! Figure 7: BI provides Six Sigma project teams with process analytics and can trigger alerts based on unusual levels of activity.


! Action Alarms

BI acts as an ongoing alarm system, alerting you to unusual activities in the process and triggering the process response plans. With clear standards in place at key points in the input and output phases of a process, and measures tracking performance, “trigger points” can be set at which some action needs to be taken to correct a problem or concern. For example, if test data show circuit boards approaching the edge of their rated energy consumption, an engineer may want to begin investigating to see what’s wrong. Or if no-shows at a hotel get 5 percent above the seasonal normal, some special contingency plans could be implemented. These alarms can be fine-tuned over time, using what you learn about the process to improve your response plans. The more promptly and effectively you can take action on key events, the more likely you are to keep customers and shareholders happy.

! Example: GE Appliances

GE Appliances (GEA) is one of the General Electric Company's eleven core businesses, and has been headquartered in Louisville, Kentucky for more than 50 years. GEA is nearly a $6 billion business employing 18,000 workers in North America, Europe, Asia and South America. Each year GEA sells more than 15 million appliances in 150 world markets under the Monogram®, GE Profile™, GE®, and Hotpoint® brand names. As part of a Six Sigma project, GEA monitors the percent of rejected items and manufacturing quality characteristics using control charts to reduce variability in their processes and therefore improve quality. A sophisticated alarm system based on Western Electric rules enables GEA to get automatic early warning signals and act upon them.

Step 8: Design For Six Sigma


Design for Six Sigma (DFSS) is the process of consolidating and continuing Six Sigma success throughout the organization. It involves implementing ongoing measures and actions to sustain improvement, defining responsibility for process ownership and ensuring “closed-loop” management. Business Intelligence remains essential to this process.

! Provide a Measurement infrastructure

The long-term development of a measurement infrastructure is a key building block for a full organizational Six Sigma system. The huge benefit is an ability to monitor and respond to change in a way that few organizations can lay claim to today. A measurement infrastructure gives you the power to follow changes in performance—good or bad—and to respond promptly to warning signs and opportunities. Over time, this information becomes a key input to the responsive, always-improving Six Sigma organization. When making decisions, many managers rely on anecdotal evidence and “gut feel” based on their prior experiences. Now that you’re successfully invested in Six Sigma projects, however, you put long terms success in jeopardy unless you employ well-chosen and well-implemented measures to track your process and solution. Your internal systems need to be able to provide all employees with easy, unrestricted access to data they need to make decisions, without having to turn to IT for their recurring analysis needs.

! Implement Executive Dashboards

As data are collected at various points throughout the organization, the need to summarize many measures—so that top leaders can effectively get an idea of what’s happening throughout the organization—becomes critical. As with any product, the more the measures are tailored to the specific end user, the better—some people want the detail, and aren’t happy without a full set of numbers, while others want a high-level summary. In general, dashboards based on graphical measurements and “traffic lighting” to identify key trends are quicker to read and make for easier comparisons. Dashboards can also be provided in the form of “process scorecards.” Unlike executive dashboards, which typically provide organization-wide data, the process scorecard is designed for a specific process. It can include “alarms” to show if and when a key indicator is nearing a problem level. For example, by noting the specified delivery time


on a cycle-time chart, a process owner could see whether times are close to exceeding the requirements. Companies like GE provide tailored process scorecard data to customers, telling them “here’s how our process is performing for you.”

! Implement Additional Projects Faster

A common business intelligence platform is key for large-scale adoption of Six Sigma. As you implement multiple projects across the organization, an ability to reuse existing information from other projects becomes essential. By standardizing on a common BI infrastructure for the projects, the different groups can avoid “reinventing the wheel” each time they start a project. For example, each group can easily access information about a new, important segment of customers. Projects come up to speed faster and data can be compared more easily. For example, Motorola uses Six Sigma measures to track rates of improvement on processes of all types, and compares the performance of efforts in very different areas of the business.

! Help “Sell” the Solution Internally

Being smart about getting others to understand and buy in to your projects is a recurring theme in Six Sigma, and the need to “sell” the solution doesn’t stop after the first few projects. The people managing and using the new process need be treated as your customers, and BI allows you to continue the process of sharing information with these “customers” using meaningful measures and charts.

!!!! Figure 8 A typical dashboard, showing key metrics across the organization.


! Predefined Best Practice Analytics

BI tools have evolved to the point where best practice analysis of common processes, such as supply chain and end-to-end revenue collection, have been embedded into predefined “analytic applications.” These applications are ready to be connected to the data sources in your organization

! Example: GE Power Systems

GE Power Systems (GEPS), a $25 billion dollar division of General Electric, is the world leader in power generation technology, products and services. With over 33,000 employees worldwide, GEPS provides products and services ranging from gas turbine technology and power generation equipment, to oil & gas generation technologies and nuclear fuel management. Through business development, acquisition and joint ventures, GEPS has 300 power-related businesses around the world and is uniquely positioned to leverage the world's resources. With an unending commitment to quality and customer service, GEPS provides the world with abundant, reliable and efficient energy. GE Power Systems received a 2002 Best Practice award from The Data Warehouse Institute, for their global data warehouse that includes information used for Six Sigma projects. From more information, visit http://www.dw-institute.com/display.asp?id=6391

!!!! Figure 9 An example of a suite of predefined analytic applications for common business processes. These applications connect to your existing data systems to provide “out-of-the-box” best-practice analysis techniques.

About Business Objects


Business Objects is the world’s leading provider of business intelligence solutions. The company’s products include BUSINESSOBJECTS 2000, the industry’s leading integrated business intelligence toolset and platform; and BUSINESSOBJECTS ANALYTICS, an integrated suite of enterprise analytic applications. Business Objects has over 15,500 customers, is present in more than 80 countries, and has integration partners worldwide.

! Market Leadership

Business Objects is recognized as the market leader in business intelligence. It is the only major BI vendor to have maintained consistent growth in both revenues and profits. Consequently, the company continues to gain market share – IDC reports indicate that Business Objects is 50% bigger than its main competitor in the query and reporting market6. Business Objects continues to receive many industry awards, including the InfoWorld Readers’ Choice Award and the DM Review Readership’s Award, as best BI product of the year. Additionally, it was voted by Intelligent Enterprise as one of the 12 Most Influential Companies in IT for the third year running. In the wider business arena, Business Objects has become a recognized leader with, for example, its CEO ranked in the top ten list of CEO Magazine’s annual survey7.

! Complete Business Intelligence Solution

Business Objects provides a full range of Business Intelligence products designed to be:

• Easy. Adapted to a wide variety of different user profiles, from advanced analysts to dashboard-viewing executives. Access a wide variety of different data sources, from relational and OLAP databases to excel and the web.

• Secure. Detailed control over information access for users both inside and outside the organization.

• Scalable. Enterprise deployments to tens of thousands of users.

• Extensible. Integrated tools and applications, for “build and buy” deployments.

6 “Information Access Tools Market Forecast and Analysis Summary, 2001-2005,” IDC, May 2001. 7 “CEO Growth 100,” CEO Magazine, May 2001.


! Proven Track Record With GE

GE has deployed Business Objects throughout more than a dozen divisions to unlock the value in their current information infrastructure, providing executives, employees, partners, and customers with the critical information they need right at their fingertips—valuable intelligence to make better business decisions.

GE divisions using Business Objects for BI over an intranet include: • GE Corporate • GE Capital Card Services • GE Capital Commercial Finance • GE Capital Commercial Equipment Finance • GE Capital Vendor Financial Services • GE Equity • GE Industrial Systems • GE Lighting • GE Medical Systems • GE Plastics • GE Power Systems* • GE Supply • Penske Logistics

GE divisions using Business Objects extranets include: • GE Capital • GE Financial Assurance • GE Industrial Systems • GE Power Systems

GE divisions using Business Objects Digital Cockpits include: • GE Capital • GE Capital Mid Market Finance • GE Equity • GE Industrial Systems • GE Medical • GE Power Systems • Penske Logistics


The Business Objects product and technology are protected by US patent numbers 5,555,403 and 6,247,008. The Business Objects logo and BUSINESSOBJECTS

are trademarks of Business Objects S.A. in the United States and/or other countries. All other company, product, or brand names mentioned herein, may be the trademarks of their respective owners. Specifications subject to change without notice. Not responsible for errors or omissions. Copyright © 2002 Business Objects S.A. All rights reserved.

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