An Enhanced Business Management System Using Lean and Six Sigma Tools

Lean, lean Six Sigma, total quality management (TQM), and other techniques have helped companies improve processes through the execution of projects. However, much of these efforts have resulted in siloed process improvements that don't benefit the enterprise as a whole.

To illustrate this point, consider an organization that spends a lot of resources and time improving manufacturing operations at a particular plant only to find that an executive decision was made to close that plant. Executives made this choice because the plant’s financials were unsatisfactory; however, if the situation were examined more closely, the plant had excess capacity relative to current product demand. The overall enterprise constraint was sales and marketing, which should have been the focus of concentrated process improvement efforts, rather than manufacturing.

For process improvement efforts to be most effective, consider how important it is that these projects be selected and executed in areas so that the entire organization benefits. This is obviously very important; however, often lean and Six Sigma projects are selected in silos. Projects can appear beneficial in isolation but often have limited, if any, benefit organizationwide.

Lean Six Sigma and other process improvement programs have striven to improve their project selection process; however, often the gains from those projects have been minimal. It seems that what needs to be done to resolve this issue is for process improvement efforts to become more integrated within the overall business system (e.g., scorecard creation/management and strategy development/execution.)

What this article describes is a system for accomplishing this orchestration, where lean and Six Sigma tools enhance the overall business system so that the organization moves toward achieving the three Rs of business: everyone doing the right things, the right way, at the right time. This system needs to encompass a management methodology and discipline where organizations replace firefighting with fire prevention.

Various aspects of this enhanced business management system are included in the following list, which references additional detailed article links:

· Strategy creation should not be an intuitive exercise but instead target specific gaps that are revealed after the business is analytically and innovatively assessed and understood (e.g., step five of the nine-step business management system, not step one.) A means to accomplish this is described in The Balanced Scorecard: Issues and Resolution.
· Scorecards need to be long lasting and systematically linked to value chain functions. A means to accomplish this is described in Are Your Business Metrics Measuring the Right Thing?.
· Performance metric reporting needs assessment for stability and capability at a high, operational 30,000-foot-level. A means to accomplish this is described in Predictive Performance Measurements.
· Improvement projects need to be determined so that there is the most enterprisewide benefit. A means to accomplish this is described in Stop Wasting Improvement Resources.
· Project execution needs to use the most appropriate tool at the right time. A means to accomplish this is described in Integrating Lean and Six Sigma Process Improvement Tools.

These concepts will now be integrated into an overall business management road map system that utilizes lean and Six Sigma tools for its execution.

Business management governance system

In these challenging times, organizations need an enhanced methodology that provides the framework for leadership to systematically understand and manage its enterprise through an ever changing and complex business environment. Such a system is described in figure 1.

Figure 1: The Integrated Enterprise Excellence System. Click for larger image.
From Figure 4.7 Integrated Enterprise Excellence, Volume II -- Business Deployment: A Leader's guide for Going Beyond Lean Six Sigma and the Balanced Scorecard, Forrest W. Breyfogle III, Bridgeway Books, 2008.

The business governance system graphically described in figure 1 provides a road map for systematically addressing current management challenges head on. Provided is a business system, not just a problem-solving-project-execution system that employs lean Six Sigma or lean kaizen events. I will refer to this methodology as the integrated enterprise excellence (IEE) system.

Most of the nine steps of this business-system process are self explanatory and some of the steps have been referenced in the previously mentioned articles; however, it needs to be highlighted that the last step in the feedback loop does not return to step one but instead to step three. The implication of this type of feedback is that a long lasting management system front end is provided, which can remain structurally constant over time, even through leadership, organizational, and strategy changes.

Lean Six Sigma provides the project execution road map of define-measure-analyze-improve-control (DMAIC). Similarly IEE has a project execution DMAIC road map referenced as P-DMAIC or project define-measure-analyze-improve-control. In addition, the IEE system has an enterprise process DMAIC road map or E-DMAIC.

Figure 2 shows the integration of these road maps, where the P-DMAIC road map and the design project road map define-measure-analyze-design-verify (DMADV) both link to the E-DMAIC system in its improve phase. Figure 3 then describes how the E-DMAIC system becomes the tool-enabling road map for achieving the nine-step business-system process presented in figure 1.

Figure 2: IEE high-level enterprise process E-DMAIC system with P-DMAIC process improvement and DMADV design project road maps.
From Figure 4.2 Integrated Enterprise Excellence, Volume II -- Business Deployment: A Leader's guide for Going Beyond Lean Six Sigma and the Balanced Scorecard, Forrest W. Breyfogle III, Bridgeway Books, 2008.

Figure 3: Relationship between 9-step IEE process and E-DMAIC phases.

Application of lean and Six Sigma tools within each of the E-DMAIC phases include:

Define and measure phases

• Establish procedures for capturing voice of the customer
• Document in the value chain the non-silo enterprise procedures and value-stream maps
• Establish and report through the value chain the functional performance metrics that can provide prediction statements

Analyze phase

• Use Six Sigma analytics to identify enterprise constraints for improvement opportunities.
• Analyze lean’s value-stream maps for reduction of waste opportunities that affect the big picture
• Analyze the enterprise financially using the tools of Six Sigma to determine cost reduction and revenue growth opportunities
• Utilize failure modes and effects analysis (FMEA) to assess and determine what should be done to minimize overall business risks.
• Blend innovation with analytics to determine high potential improvement areas for enhancing the overall enterprise.
• Establish focused strategies—analytically and innovatively determined—that lead to specific project opportunities.

Improve phase

• Use analytics to determine which projects should be undertaken first so that enterprisewide benefits are maximized.
• Execute improvement projects using the E-DMAIC or DMADV road maps.

Control phase

• Establish and utilize a control plan for ensuring that established procedures and practices are executed.

Summary

Jim Collins, in his book, Good to Great (HarperBusiness, 2001) describes a level-five leader as being a great leader not only when working at an organization but when the organization maintains greatness even after the leader is no longer there. I refer to this as a level-five system. The system described in this article provides a framework for level-five organization creation, achievement of the Malcolm Baldrige National Quality Award, and the Shingo Prize.

About The Author

Forrest Breyfogle - New Paradigms

CEO and president of Smarter Solutions Inc., Forrest W. Breyfogle III is the creator of the integrated enterprise excellence (IEE) management system, which takes lean Six Sigma and the balanced scorecard to the next level. A professional engineer, he’s an ASQ fellow who serves on the board of advisors for the University of Texas Center for Performing Excellence. He received the 2004 Crosby Medal for his book, Implementing Six Sigma. E-mail him at forrest@smartersolutions.com