Six Sigma: A Breakthrough Strategy

for Profitability

A
Making
strides
along the road
to defect-free
work

profitability, increase market share, and

improve customer satisfaction has been
launched by a select group of leaders
in American industry.
Known as six sigma,1 the strategy provides
companies with a series of interventions and statistical tools that can lead to breakthrough profitability and quantum gains in quality, whether a companys products are durable goods or services.
Taken from a letter in the Greek alphabet, the
term sigma is used in statistics as a measure of
variation. The six sigma strategy measures the
degree to which any business process deviates
from its goal. The average product, regardless of
how simple or complex, has a quality performance
value of four sigma, for example. This is where
most American companies cluster.
The best products, however, are valued at six
sigma, a level of excellence in performance that is
truly world class.

Six sigma 101

Consequently, as sigma increases, product reliability improves, the need for testing and inspection
diminishes, work in progress declines, costs go
down, cycle time goes down, and customer satisfaction goes up.
Figure 1 displays the short-term understanding
of six sigma for a single critical-to-quality (CTQ)
characteristic; in other words, when the process is
centered. Figure 2 illustrates the long-term perspective after the influence of process factors,
which tend to process centering. From these figures, one can readily see that the short-term definition will produce 0.002 parts per million (ppm)
defective. However, the long-term perspective
reveals a defect rate of 3.4 ppm.
(This degradation in the short-term performance
of the process is largely due to the adverse effect of
long-term influences such as tool wear, material
change, and machine setup, just to mention a few.
It is these types of factors that tend to upset process
centering over many cycles of manufacturing. In
fact, research has shown that a typical process is
likely to deviate from its natural centering condition by approximately 1.5 standard deviations at

The philosophy of six sigma recognizes that

there is a direct correlation between the
number of product defects, wasted
Figure 1. Graphical Definition of ShortTerm
operating costs, and the level of cusPerformance for a Single Characteristic
tomer satisfaction. The six sigma statistic measures the capability of the
process to perform defect-free work.
-6
st
+6
st
For example, if the wall-to-wall carpet
in a 1,500-square-foot home were

cleaned to the three-sigma level, about
-3
st
+3
st
four square feet of carpet (the carpet
Scale
area under a typical recliner chair)
Process Width
would still be soiled. If that same carDesign Width
pet were cleaned to the six-sigma
Scale
level, only an area the size of a pinhead
LSL
T
USL
would still be soiled.
.001 ppm LSL
.001 ppm USL
With six sigma, the common measurement index is defects per unit and
can include anything from a component, piece of material, or line of code,
to an administrative form, time frame,
or distance. The sigma value indicates
Scale
how often defects are likely to occur.
LSL
T
USL
The higher the sigma value, the less
(Source: The Vision of Six Sigma: A Roadmap for Breakthrough, Fifth Edition)
likely a process will produce defects.

by
Mikel J. Harry

60

N AGGRESSIVE CAMPAIGN TO BOOST

Quality Progress May 1998

Figure 2. Graphical Definition of LongTerm Six Sigma

Performance for a Single Characteristic
(Distribution Shifted 1.5
)

-7.5
st

level. Of course, this table would be applicable to any product,

process, transaction, or service.
Naturally, defects are not limited to the manufacturing
process. Defects also occur in engineering design, in the time it
takes to process a patent, and in bank transactions. All processesfrom airline baggage handling to assembling an aircraft

+4.5
st


-3
st

Even companies adverse to management fads are

+3
st
Scale

Process Width

embracing six sigma, believing that six sigma is a

Design Width

Scale
LSL

0 ppm LSL

USL

+1.5

3.4 ppm USL

Scale
LSL

USL

(Source: The Vision of Six Sigma: A Roadmap for Breakthrough, Fifth Edition)

any given moment in time. With this principle in hand, one can
make a rational estimate of the long-term process capability
with knowledge of only the short-term performance. For example, if the capability of a CTQ characteristic is 6.0
in the
short term, the long-term capability may be approximated as
6.0
1.5
= 4.5
, or 3.4 ppm in terms of a defect rate.)
It should be pointed out that the sigma capability of a
process may be estimated via an array of analytical means. Of
course, the specific means selected depends upon factors such
as the type of data one is presented with, production volume,
time duration over which the data were collected, and a host of
other factors. However, one factor common to all statistically
based approaches is the idea of opportunities for defects,
which is the sum of all CTQs. The principal aim is to statistically reduce quality problems to a metric called defects per opportunity (DPO). In turn, the DPO is scaled to DPMO, or defects
per million opportunities. From here, the DPMO metric can be
transformed into an equivalent Z value, also known as sigma
capability.
For a better understanding of this idea, Table 1 presents various levels of sigma capability and the implications of each

Table 1.
Sigma
6 sigma
5 sigma
4 sigma
3 sigma
2 sigma
1 sigma

method of substance that will increase market share,

decrease costs, and grow profit margins.
enginecan deviate and cost companies additional time, labor,
and material. Through the sigma scale of measure, one can create breakthrough charts from which to study competing levels
of capability (see Figure 3). From such charts, one can isolate
best-in-class performance for further study.

Black belts

Since organizations are built around people and their know

ledge, not just philosophies or programs, the success of the six
sigma breakthrough strategy2 depends on people who are
properly trained. Deploying special forces known as black
belts throughout the company to work full time on projects to
drive out defects is integral to success. Training black belts provides the necessary knowledge and technical ground for companies to achieve their targets.
Black belts perform the following tasks:
Mentor: Cultivate a network of six sigma individuals at the
local organization or site.
Teach: Provide formal training of local personnel in new
strategies and tools.
Coach: Provide one-on-one support to local personnel.
Transfer: Pass on new strategies and tools in the form of
training, workshops, case studies, and local symposia.
Identify: Highlight or discover business opportunities
through partnerships with other organizations.
Influence: Sell the organization on the use of six sigma
strategies and tools.
The average black belt project will save a
company
$175,000. Black belts, with 100% of
Practical Impact of Process Capability
their time allocated to black belt projects, can
execute five or six projects during a 12-month
Parts per million
Cost of poor quality
period, adding approximately $1 million to
3.4 defects per million
<10% of sales
(World class)
annual profits. When the ratio of black belts to
233 defects per million
10-15% of sales
employees is at its ideal (one black belt for every
6,210 defects per million
15-20% of sales
(Industry average)
100 employees), companies can achieve a 6%
66,807 defects per million
20-30% of sales
cost reduction each year. Approximately one
308,537 defects per million
30-40% of sales
(Noncompetitive)
master black belt is needed for every 100 black
690,000 defects per million
belts.

Quality Progress May 1998

61

Figure 3. Standard Six Sigma Benchmarking Chart

IRS - Tax Advice
(phone in)
140,000 PPM

1,000,000

Restaurant Bills
Doctor Prescription Writing

100,000

Payroll Processing

10,000

Order Writeup

Average
Company

1,000

Journal Vouchers
Wire Transfers
Airline Baggage Handling

Purchased Material
Lot Reject Rate

100
10

Best-in-Class
1
2

(Source: The Vision of Six Sigma: A Roadmap for Breakthrough, Fourth Edition)

Domestic Airline Fatality Rate

(0.43 PPM)

Figure 4. The Six Sigma Breakthrough Strategy

Measure
Management Leaders

Product Benchmarking

Analyze

Management & Technical Leaders

Process Baseline Analysis

Breakthrough Cookbook

Application Projects
B C D E
F

1 Select CTQ Characteristics

Measure 2 Define Performance Standards

3 Validate Measurement Systems
4 Establish Product Capability

Analyze

5 Define Performance Objectives

6 Identify Variation Sources
7 Screen Potential Causes

Improve 8 Discover Variable Relationship

9 Establish Operating Tolerances
10 Validate Measurement System

Control

11 Determine Process Capability

12 Implement Process Controls

Audit and Review

(Source: The Vision of Six Sigma: Supplier Breakthrough, First Edition)

How the breakthrough strategy works

The six sigma breakthrough strategy involves a series of
steps that are specifically designed to lead a six sigma black belt
through the gauntlet of process improvement. Most important,
the breakthrough strategy takes the key manufacturing, engineering, and transactional processes of entire corporations
through the four breakthrough phases. Each breakthrough phase
establishes the course and pace in the race for total customer
satisfaction. Figure 4 displays the breakthrough strategy and the
62

Quality Progress May 1998

Improve

activities necessary to fulfill the intents of each

phase.
Phase 1. Measurement. In this phase, the
black belt selects one or more CTQ characteristics, maps the respective process, makes the
necessary measurements, records the result,
and estimates the short- and long-term process
capability.
Phase 2. Analysis. This phase allows the
black belt to benchmark key product performance metrics. Following this, a gap analysis
is often undertaken to identify the common
factors of successful performance; in other
words, what factors explain best-in-class performance. In some cases, its necessary to
redesign the product and/or process.
Phase 3. Improvement. This phase guides
the black belt to specific product characteristics
that must be improved to achieve the performance and financial goals. Once this is done,
the characteristics are diagnosed to reveal the
major sources of variation. Next, the key
process variables are identified by way of statistically designed experiments. For each
process variable that proves to be leverage in
nature, performance specifications (tolerances)
are established.
Phase 4. Control. This phase is designed to
help the black belt document and monitor the
new process conditions via statistical process
control methods. After a settling-in period, the
process capability is reassessed to ensure the
gains are being maintained. Depending upon
the outcomes of such a follow-on analysis, it
may be necessary to revisit one or more of the
preceding phases.
When these four stepsmeasurement,
analysis, improvement, and controlare completed for all key processes within a business,
breakthrough improvement occurs in economics and customer satisfaction.

The history of six sigma

In 1981, Bob Galvin, then chairman of
Motorola, challenged his company to achieve a
tenfold improvement in performance over a
Control
five-year period. While Motorola executives
were looking for ways to cut waste, an engineer by the name of Bill Smith was studying
the correlation between a products field life
and how often that product had been repaired
during the manufacturing process. In 1985,
Smith presented a paper concluding that if a product were
found defective and corrected during the production process,
other defects were bound to be missed and found later by the
customer during the early use of the product. On the other hand,
if the product was assembled error free, the product rarely failed
during early use by the consumer. Additionally, Motorola was
finding that best-in-class manufacturers were making products
that required no repair or rework during the manufacturing
process.

Although Motorola executives agreed

with Smiths supposition, the challenge
We bring good things to life
became how to take the theory of six
A six sigma case study
sigma and create practical ways to
achieve six sigma in each of Motorolas
At a General Electric shareholders meeting in 1997, CEO Jack Welch
operations.
extolled the successes of six sigma:
In 1988, Motorola won the Malcolm
We had a billing system at GE Lighting that worked just fine from our perBaldrige National Quality Award, which
spective.
The problem was it didnt mesh very well electronically with the purset the standard for other companies to
chasing system at Wal-Martone of our biggest customers. Our system didnt
emulate.
work for them and was causing disputes, delayed payments, and was wasting
As other companies studied its success,
Wal-Marts time. A black-belt team using six sigma methodology, information
Motorola realized its strategy to attain six
technology, and $30,000 in investment tackled the problem from Wal-Marts persigma could be further extended. Thus
began the arduous and painstaking task of
spective, and in four months reduced defects in the system by 98 percent. The
creating a deeper strategy with specific
result for Wal-Mart was higher productivity and competitiveness and fewer distactics and tools to achieve total customer
putes and delaysreal dollar savings. The result for GE was a return many
satisfaction.
times that of our investment.
Long convinced of the validity of
from Jack Welch Speaks, by Janet Lowe, New York, NY: John Wiley & Sons,
Smiths work and the inherent value of
trying to achieve six sigma, I had taken
1998.
on the challenge of creating the breakthrough strategy to achieve six sigma
through uniform statistical measurements.
Based on my paper The Strategic Vision for Accelerating Six Sigma within
The Six Sigma Academy
Motorola, Galvin requested that I leave Motorolas Government Electronics
Group in Phoenix, AZ, and start the Six Sigma Research Institute in Schaumburg,
Since its establishment in 1994, the
IL. With the financial support and participation of IBM, Texas Instruments
Six Sigma Academy has been the marDefense Group, Digital Electronics, Asea Brown Boveri, and Kodak, the Six
ket leader in six sigma training and
Sigma Research Institute began developing six sigma implementation strategy,
implementation. Located in Scottsdale,
deployment guidelines, and advanced application tools.
AZ, the academy is the developer of sixAfter leaving Motorolas Six Sigma Institute, Six Sigma Academy President
sigma-based Leadership, Champion,
Richard Schroeder and I joined forces at Asea Brown Boveri Ltd. Together we
Master Black Belt, Black Belt, Green
worked to further refine the implementation and deployment of the six sigma
Belt, and Breakthrough Strategy1 training
breakthrough strategy by focusing the strategy on Asea Brown Boveris net profits as a way to ultimately improve product quality, performance, productivity, and
programs to drive new product and
costs. The breakthrough strategy resulted in a 68% reduction in defect levels and
process capabilities through a complete
a 30% reduction in product costs, which led to an $898 million savings/cost
six sigma training curriculum.
reduction each year for two years.
The academy accelerates the transforThe culmination of this 10-year journey to improve and clarify the six sigma
mation of corporations to best-in-class
breakthrough strategy resulted in the creation of the Six Sigma Academy and the
stature by providing the knowledge and
academys Navigator system, a state-of-the-art software program that guides cominfrastructure necessary to implement,
panies and their black belts through training, project selection, and implementadeploy, sustain, and benefit from a timetion of the breakthrough strategy.

Six sigma success stories

As American industry searches for new ways to buoy profitability, companies
such AlliedSignal, General Electric, Sony, Texas Instruments, Bombardier, Crane
Co., Lockheed Martin, and Polaroid are beginning to directly tie quality to their
bottom line. Even companies adverse to management fads are embracing six
sigma, believing that it is a method of substance that will increase market share,
decrease costs, and grow profit margins.
Larry Bossidy, CEO of AlliedSignal, enhanced the companys brand equity by
implementing the six sigma breakthrough strategy. The company has already
trained 6,000 employees in six sigma and the breakthrough strategy, and will train
an additional 2,000 before the end of 1998, with the goal of increasing productivity 6% each year in its manufacturing sectors. Since Bossidy implemented the program in 1994, the cumulative impact of six sigma has been a savings in excess of
$1.2 billion in direct costs, according to Timothy Jubach, vice president of corporate operational excellence at AlliedSignal.
General Electrics (GE) Jack Welch, a self-proclaimed cynic when it comes to
quality programs, describes six sigma as the most important initiative GE has

proven system of application tools and

deployment methods.
The academy has refined six basic
steps to improve a company's value:
1. Process improvements
2. Product improvements
3. Investor relations
4. Design methodology
5. Supplier improvement
6. Training and recruiting

Reference
1. The ter ms Breakthrough Strategy,
Champion, Master Black Belt, Black Belt, and
Green Belt are federally registered trademarks
of Sigma Consultants, L.L.C., d/b/a Six Sigma
Academy.

Quality Progress May 1998

63

ever undertaken. In 1995, Welch mandated that each GE operationfrom credit card services to aircraft engine plants to
NBC-TVwork toward achieving six sigma. GE averaged
three sigma when it introduced the program. Within 22 months,
the company improved to 3.5 sigma (22,700 defects per million), and earnings grew significantly13% in 1996 and 14%
in 1997. Welch expects GE to reach six sigma by the year 2000,
improving its operations by more than 90% per year.3 Although
spending on six sigma training and projects will reach $450
million in 1998, profits will increase to $1.2 billion and earnings per share will increase by 25 cents.
Jennifer Pokrzywinski, an analyst with Morgan Stanley, Dean
Witter, Discover & Co., writes Six sigma companies typically
achieve faster working capital turns; lower capital spending as
capacity is freed up; more productive R&D spending; faster new
product development; and greater customer satisfaction.4
Pokrzywinski estimates that by the year 2000, GEs gross annual
benefit from six sigma could be $6.6 billion, or 5.5% of sales.
Bombardier Chairman Laurent Beaudoin, another executive
adverse to fads, adopted six sigma in April 1997. The company
first implemented the program in its aerospace group, followed
by the train manufacturing group, the Sea-Doo and Ski-Doo
groups, the capital group, and the services group. By the end of
1998, there will be more than 100 full-time six-sigma-certified
employees dedicated to aerospace qualitymaking
Bombardier the highest-proile Canadian company to adopt six
sigma.5

Scorecard applications
As companies around the world adopt the six sigma breakthrough strategy, many employees are even applying it to their
personal lives. One Polaroid executive responsible for overseeing the implementation of the breakthrough strategy claims
there is a direct correlation between the sigma capability of his
golf game and his handicap. He boasts that the application of
six sigma measurements has trimmed at least 35 strokes off his
game.

References
1. Six sigma is a federally registered trademark of Motorola.
2. The terms Breakthrough Strategy, Champion, Master Black
Belt, Black Belt, and Green Belt are federally registered trademarks
of Sigma Consultants, L.L.C., d/b/a Six Sigma Academy.
3. The Globe and Mail Report on Business Magazines, The Six
Sigma Ensigns, October 1997, p. 62.
4. Morgan Stanley, Dean Witter, Discover & Co., company update,
June 6, 1996.
5. The Six Sigma Ensigns, p. 64.
Mikel J. Harry is the founder and CEO of the Six Sigma Academy
in Scottsdale, AZ. He has a doctorate from Arizona State University
in Tempe.

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