Operational Excellence with Lean Six Sigma E-Book

Bart A. Lameijer

• Herausgeber: Van Haren Publishing
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 266

Veröffentlichungsjahr: 2022

Beschreibung

Lean Six Sigma is the global standard for organizing the design, data-based improvement and control of business processes. Well-designed and controlled processes are key in achieving and sustaining operational excellence. They ensure the quality of service and care, the reliability and safety of work that is done, and a timely processing with short waiting times. High quality processes will at the same time improve the operation’s flexibility. Thereby allowing one to adjust to changes in demand and other circumstances. An organizational capability to harness data-based process improvement, finally, facilitates organizational learning and is foundational for the fruitful implementation of ever increasing digitization and automation opportunities. Lean Six Sigma offers a complete model for shaping modern continuous improvement programs in organizations. The methodology is built on principles and methods for fact-based process improvement that have proven themselves over the last decades, and will continue to do so in the decades to come. Having emerged in manufacturing, the approach continuously evolved and gained tremendous momentum in the services and healthcare industries. This book offers a thorough and pragmatic account of Lean Six Sigma project- and programme implementation with a special focus on applications in services and healthcare organizations.

Leseprobe

OPERATIONAL EXCELLENCE WITH LEAN SIX SIGMA

Other publications by Van Haren Publishing

Van Haren Publishing (VHP) specializes in titles on Best Practices, methods and standards within four domains:

- IT and IT Management

- Architecture (Enterprise and IT)

- Business Management and

- Project Management

Van Haren Publishing is also publishing on behalf of leading organizations and companies: ASLBiSL Foundation, BRMI, CA, Centre Henri Tudor, CATS CM, Gaming Works, IACCM, IAOP, IFDC, Innovation Value Institute, IPMA-NL, ITSqc, NAF, KNVI, PMI-NL, PON, The Open Group, The SOX Institute.

Topics are (per domain):

IT and IT Management

ABC of ICT

ASL®

CMMI®

COBIT®

e-CF

ISO/IEC 20000

ISO/IEC 27001/27002

ISPL

IT4IT®

IT-CMFTM

IT Service CMM

ITIL®

MOF

MSF

SABSA

SAF

SIAMTM

TRIM

VeriSMTM

Enterprise Architecture

ArchiMate®

GEA®

Novius Architectuur

Methode

TOGAF®

Project Management

A4-Projectmanagement

DSDM/Atern

ICB / NCB

ISO 21500

MINCE®

M_o_R®

MSP®

P3O®

PMBOK ®Guide

Praxis®

PRINCE2®

Business Management

BABOK ®Guide

BiSL® and BiSL® Next

BRMBOKTM

BTF

CATS CM®

DID®

EFQM

eSCM

IACCM

ISA-95

ISO 9000/9001

OPBOK

SixSigma

SOX

SqEME®

For the latest information on VHP publications, visit our website: www.vanharen.net.

Colophon

Title:

Operational Excellence with Lean Six Sigma

Subtitle:

Handbook for Implementing Process Improvement with Lean Six Sigma

Authors:

Jeroen de Mast, Ronald J.M.M. Does, Henk de Koning, Bart A. Lameijer, Joran Lokkerbol

Publisher:

Van Haren Publishing, ‘s-Hertogenbosch-NL, www.vanharen.net

ISBN Hard copy:

978 94 018 0829 3

ISBN eBook (pdf):

978 94 018 0830 9

ISBN ePUB:

978 94 018 0831 6

Edition:

First edition, first impression, January 2022

Layout and Design:

Coco Bookmedia, Amersfoort-NL

Copyright:

The authors & Van Haren Publishing, 2022

Although this publication has been composed with most care, neither author nor publisher can accept any liability for damage caused by possible errors and/or incompleteness in this publication.

No part of this publication may be reproduced in any form by print, photo print, microfilm or other means without written permission by the publisher.

Contents

Executive summary of Operational Excellence with Lean Six Sigma

Definition of Lean Six Sigma

Benefits

Strategic value

Methodology

Organization

Lean Six Sigma as management instrument

Lean Six Sigma as professional skill

References

Further reading

1 The business and economic background of Lean Six Sigma

The hidden factory

Benefits from Lean Six Sigma projects

The strategic value of Lean Six Sigma

Lean Six Sigma, innovation and competence building

In summary

Want to know more? Lean Six Sigma and competitive strategy

References

Further reading

2 Organizational structure for Lean Six Sigma

Organizing improvement activities in organizations

Program management and Lean Six Sigma core team

Project timelines, roles and responsibilities

Training program and project tracking (reviews)

References

Further reading

3 The Six Sigma methodology

Sound research principles

The DMAIC roadmap

Why is it called Six Sigma?

Summary

Want to know more? Six Sigma and the Scientific Method

References

Further reading

4 The Lean methodology

Lean management

Lean principles

Lean philosophy

Other appearances of the Lean philosophy

Integrating Lean and Six Sigma

References

Further reading

5 Implementing Lean Six Sigma in organizations

Top management commitment and vision

Core program management team

Training and project support

Business function alignment

Business Process Management

Human Resource Management

Financial Management

Other business functions

Cultural integration in ‘all we do’

Starting the first wave

References

Further reading

6 The history and development of Lean Six Sigma

1900–1980 in the West: mass fabrication and efficiency

The 1980s and 1990s: Catch-up in the West

Standards (ISO-9000), certification and awards

The future

Further reading

7 Project selection and problem definition

The project selection process

Project identification

1. Define

2. Measure

3. Analyze

Project charters

1. Process description

2. Benefits, investments and side conditions

3. Project details

4. Project organization

5. Selection of final projects

Further reading

The Define phase at a glance

8 Measure and data collection

The Measure phase at a glance

DMAIC 1: Define the CTQs

Operational definitions

Measurement plan

Data collection sheet

DMAIC 2: Validate the measurement procedures

Validity

Example: validation of waiting time data in a call center

Systematic measurement error

Random measurement error

Collecting the data

Further reading

9 Elementary statistics for Lean Six Sigma

Types of data and datasets

Describing data

Estimating probabilities and frequencies

Diagnostic tools

Relations between variables

Further reading

10 Analyze the problem

The Analyze phase at a glance

DMAIC 3: Diagnose the current process

Process behavior in time: statistical control and control charts

Process capability analysis

Value stream map

Process Mining for process discovery, diagnosis and conformance

Redefining the business case

Benchmarking

DMAIC 4: Identify potential influence factors

Tracking down potential influence factors

1. Inventory of process know-how

2. Technical literature and experts

3. Lessons from analogous situations

4. Exploratory data analysis

5. Lessons from bad examples (“autopsies”)

6. Failure modes and effects analysis (FMEA)

7. Eliminate and zoom-in

8. Gemba study

Keeping track of ideas and suggestions: the process matrix

Influence factors rooted in the organizational system – a Systems Thinking approach

Want to know more?

References

Further reading

11 Improve by designing and implementing solutions

The Improve phase at a glance

DMAIC 5: Establish the effect of influence factors

Data collection and experimental design

Further reading on Design of Experiments

Statistical modeling, hypothesis testing and goodness of fit

Statistical modeling and Big Data

Statistical modeling and Machine Learning

DMAIC 6: Design improvement actions

1. Optimal process settings

2. Robust design

3. Variability reduction

4. Process reengineering

5. Process controls

6. Make processes manageable

What if people are the problem?

Reducing throughput time

1. Defining the process and eliminating waste

2. Applying the Theory of Constraints

1. Identify the constraint

2. Maximally exploit the constraint

3. Subordinate other resources to the constraint’s performance

4. Improve capacity at the constraint

5. Repeat steps 1 – 4 for the next constraint

3. Critical Path Analysis

4. WIP-Control

Change management for solution implementation

Role modeling

Foster understanding and conviction

Developing talent and skills

Reinforcing change through formal mechanisms

References

Further reading

12 Control process performance and ensure sustainable improvement

The Control phase at a glance

DMAIC 7: Improve process control

The control pyramid

The mini company

Knowledge management

Self-evaluation

Process controls and the control plan

Want to know more? Self-control and quality control at the shopfloor

Further reading

DMAIC 8: Close the project

Benefit realization

Managing the implementation of a change

Project discharge

Further reading

13 Case studies of Lean Six Sigma implementation

Lean Six Sigma in financial services

Processing address changes in a bank

Processing requests for loans

Reduction of information requests in an insurance company

Define

Measure

Analyze and Improve

Control

Reduction of the number of defects in processing new insurances

Lean Six Sigma in Healthcare

Complexity reduction in hiring personnel

Reduction of admission time after delivery

References

Further reading on cases of Lean Six Sigma implementation

About the authors

Executive summary of Operational Excellence with Lean Six Sigma

The 20th century saw an incredible development of professional organizations. Besides the impact of technological advances, innovations in management structures and methodologies have resulted in the highly productive organizations of today. When the race for outperforming competitors on quality and efficiency gained momentum, companies started to copy each other’s best practices. Consultants and management gurus quickly jumped in and started giving names to these methodologies: total quality management, just-in-time, business process reengineering, statistical process control, quality circles, lean manufacturing, continuous improvement, et cetera. Time has singled out the methodologies, principles and approaches that really added value. While most approaches have been presented as panaceas at one time or another, time has shown that they are in fact complementary.

Lean Six Sigma is not revolutionary; it is built on principles and methods for data-based process improvement that have proven themselves over time. It has incorporated the most effective approaches and integrated them into a full program for operational excellence purposes.

Operational Excellence

“striving for the best in quality and performance in all operations of the business”

[Hammer, 2004]

It offers a management structure for organizing continuous improvement of routine tasks, such as manufacturing, accounting, nursing, sales, and other work that is done routinely. Furthermore, it enables complex organizational problem solving using advanced data analytical techniques. It provides guidance for clarifying and sizing organizational problems, it dictates how to do fact-based problem root cause analysis, and it provides a collection of tools and principles to solve operational problems. Finally, it offers a methodology and tools for carrying out (process) improvement projects effectively. In an economy which is determined more and more by dynamics than by static advantages, continuous improvement of routine tasks and sustainably solving complex operational issues is a crucial driver of competitiveness.

Continuous Improvement

“an organization-wide process of focused and sustained incremental or more radical innovation”

[Bessant and Francis, 1999]

Definition of Lean Six Sigma

Lean Six Sigma is a coming together of both Lean Management and Six Sigma. Six Sigma is best defined as “an organized and systematic methodology for strategic process improvement and new product and service development that relies on statistical methods and the scientific method to make dramatic reductions in customer defined defect rates” (Linderman et al., 2003). Lean Management is best defined as “a management philosophy focused on identifying and eliminating waste throughout an entire value stream, extending not only within the organization, but also along its entire supply chain network” (Shah and Ward, 2007). Together Lean Six Sigma can best be defined as “a structured data-based methodology for sustainable process improvement”.

Benefits

■ Improvement and redesign of routine tasks (manufacturing processes, service delivery, marketing, healthcare procedures, sales, et cetera).

■ Sustainable solutions for complex organizational issues (end-to-end process bottlenecks, recurring strategic impediments, profit and loss account optimization, et cetera).

■ Superior quality, efficiency, dependability and flexibility in both production and service processes.

Strategic value

■ Cost advantages: superior productivity and equipment utilization, avoidance of unnecessary capital expenditure, working capital reduction.

■ Advantages derived from superior customer satisfaction: reduced price sensitivity, growth of revenue or market share, increased customer retention.

■ Competence building in manufacturing or service delivery: deep knowledge of process functioning, better understanding of value drivers, increased agility in process or product design and implementation.

■ Competence building in continuous and company-wide improvement and innovation: development of an organizational capability to understand and solve complex organizational problems, thereby facilitating organization learning.

Methodology

■ Professional and science-based problem solving.

■ Precise and quantitative problem definition.

■ Data-based diagnosis.

■ Innovative generation of new ideas.

■ Field-testing of ideas before implementation.

■ Sustainable improvement realization.

Organization

■ Program management consisting of a Lean Six Sigma director, program managers (daily management), and Lean Six Sigma Master Black Belts (knowledge resources).

■ Project management consisting of a Champion (project owner) and a Black Belt or Green Belt (project leader).

■ Team members: subject matter experts, shopfloor personnel.

Acknowledging that process improvement requires process specific tacit knowledge and acceptance by the shopfloor, Lean Six Sigma favors project leaders from the line organization to staff personnel or external consultants. Given the importance of the strategic focus and integration of the method, Lean Six Sigma prescribes that projects are monitored and reviewed by Champions and program management with executive or senior management mandate.

Lean Six Sigma as management instrument

Managers and professionals with an objective to improve product or service quality, reduce operational costs or increase income are confronted with a wide selection of management instruments. The premier focus of Lean Six Sigma is to improve operational performance by improving processes. Thereby Lean Six Sigma is unique, but not without complementarity.

First, the capability to understand and sustainably improve processes allows for optimal decision-making related to process automation opportunities, optimal design of business intelligence monitoring solutions and effective deployment of data science capabilities.

Second, Lean Six Sigma is a comprehensive methodology that enables business process management in organizations. It provides powerful instruments and guidelines for process owners to, besides manage, optimize processes.

Finally, Lean Six Sigma is a methodology (i.e. a collection of principles and powerful (statistical) techniques to make data-based decisions) that is traditionally deployed in structured project formats. For a methodology to be effective, little compromises on the content should be made. For a methodology to be accepted and adopted, appropriate deployment structures that fit existing organizational ways-of-working should be designed, either more or less iterative or collaborative.

Lean Six Sigma as professional skill

The 21st century has seen an incredible development of automation technologies and digitization of business models. As a consequence, routine tasks are increasingly being executed by diligent digital workers. Professional skills that facilitate critical thinking and analysis, problem solving, self-management and working with people are becoming ever more important. The ability to think analytical, learn and be creative are expected to be among the top skills for the decades to come. Lean Six Sigma facilitates the development of these skills. It provides tools and techniques for analytical disentangling of complex problems, it facilitates learning by methods to explore and confirm causes-and-effects and it instills creativity by offering guidelines for divergence and convergence processes in both problem cause- and solution finding processes.

References

Bessant, J. and Francis, D. (1999). Developing strategic continuous improvement capability. International Journal of Operations & Production Management, 19(11), 1106-1119.

Hammer, M. (2004). Deep change: How operational innovation can transform your company. Harvard Business Review, 82(4), 84–93.

Linderman, K., Schroeder, R.G., Zaheer, S. and Choo, A.S. (2003). Six Sigma: a goal theoretic perspective. Journal of Operations Management, 21(2), 193-203.

Shah, R. and Ward, P. T. (2007). Defining and developing measures of lean production. Journal of Operations Management, 25(4), 785-805.

Further reading

World Economic Forum. (2020). The Future of Jobs Report. Accessible via: https://www.weforum.org/

1 The business and economic background of Lean Six Sigma

A common misconception is that Lean Six Sigma companies strive to get their processes at the Lean Six Sigma level of quality, which corresponds to a defect rate of 3.4 per million. The claim of a specific level of conformance quality being optimal across industries is economic nonsense. Another common misconception is that Lean Six Sigma is a business strategy. It is not; it is a framework for organizing improvement activities. Having an effective organization for improvement activities is of great strategic importance, but Lean Six Sigma is not a substitute for a good strategy (and in fact, generic, ready-made approaches cannot be strategic by definition). Pursuing operational excellence typically is the strategic objective, for which companies decide to implement Lean Six Sigma.

This chapter provides an overview and discussion of the business and economic background of Lean Six Sigma. It discusses the type of benefits Lean Six Sigma projects bring, and their economic implications. Moreover, the chapter describes Lean Six Sigma from the perspective of competitive strategy, suggesting how the program can be aligned with a company’s strategy, but also describing some fallacies and potential pitfalls.

The hidden factory

Lean Six Sigma projects focus on processes. These can be manufacturing processes, service delivery processes, processes in healthcare, backoffice processes, accounting processes, sales: all work that is done routinely can be viewed as a process. A process consists of a number of operations that turn input into output. A simple representation is given in Figure 1.1. Input can be raw materials in a plant to be processed into products, but also a request for a loan (to be processed into an offer), a notification of a change of address (to be entered in the computer system), or a patient willing to see a doctor (to be “processed” into a diagnosed patient).

Figure 1.1 A business process

People who have worked in organizations know, however, that Figure 1.1 is an idealized and sterile portrayal of what the real work is about.

Let us zoom in on the customer side of Figure 1.1. The performance of many processes is perceived by customers as substandard. They feel they have to wait too long, or judge the provided service too expensive compared to the offerings of other providers, they encounter too many errors and mistakes, or characteristics of the product that are not good enough. Problems like these are quality problems, and they confront the organization with real problems. First, quality problems cost the organization a lot of money. Because of quality problems the organization needs a complaints department, may have to pay compensation, and has to do inspections and checks. Costs that an organization makes because things are not done right are called cost of poor quality; see Burgess (1996) for an overview and discussion. But (service) quality has important strategic implications: an enterprise offering better quality may ask a higher price, or may be able to increase market share or revenues.

Next, let us zoom in on the process side of Figure 1.1. Many processes do not work like efficient clockworks: due to mistakes and errors work has to be redone. Tasks are redundant or duplicative, forms and procedures are needlessly complex and poorly standardized, files and requests pile up, patients and clients have to wait in a queue, files and requests are sent from one place to another, employees lose time chasing information or because their software applications are not optimized, employees do not know what it is the customer actually wants. Exhibit 10.2 in Chapter 10 gives an overview of standard forms of waste in processes.

Figure 1.2 The Hidden Factory

The quality and efficiency issues indicated in Figure 1.2 are everyday reality. They are called the hidden factory because they are often invisible on flowcharts and process descriptions, just as they are obscured in Figure 1.1. In all organizations the hidden factory costs substantial amounts of money. In general, the burden of the hidden factory has increased exponentially with processes in manufacturing and services becoming more and more complex. The traditional approaches to keep the situation under control — reactive approaches like inspection and monitoring, and piecemeal approaches like continuous improvement — simply are no longer enough in many industries.

Companies implementing Lean Six Sigma choose to minimize the hidden factory by investing substantial resources in improvement projects. They deploy people from both professional- and middle-management roles, clearing their schedules for at least a few days a week, training them in becoming effective project leaders, and having them conduct improvement projects. The investment in time and money is substantial; the next sections explore what the benefits consist of.

Benefits from Lean Six Sigma projects

An organization, be it a business enterprise or a not-for-profit organization, could be conceived as a collection of routine operations. Manufacturing, sales, backoffice processes, marketing, nursing: these are functions performed in a routine manner. Lean Six Sigma projects are about the improvement of these routine operations, seeking to make them more effective and more efficient, striving for processes that run like clockwork. Many of the routine operations suffer from recurring problems and crises. Line management and personnel are usually over-occupied keeping things running. Dealing with problems typically takes the form of firefighting, and quick and dirty solutions are applied before rushing off to the next crisis. Recurring problems make for good Lean Six Sigma projects. Lean Six Sigma brings understanding of the root causes of the problem, and provides a definitive, fact-based and optimal solution. Even if a process does not suffer from severe problems, there is a lot to gain from periodic process overhaul. Processes evolve over time, and typically they grow in a direction of more complexity, more malfunctions plus makeshift solutions, and more obsolete or redundant work. Moreover, staffing is usually not based on workload, but has historically grown. Lean Six Sigma projects optimize processes, eliminate waste, and provide a quantitative basis for staffing and line balancing.

Besides tackling internal problems, Lean Six Sigma projects are deployed to tackle issues perceived by customers as problematic. Customer feedback shows which aspects of a business are perceived as substandard, but they also point to new potential business. Improvement projects tackle dissatisfiers, but can also develop or enhance latent opportunities for growth.

The improvement of routine operations is what Lean Six Sigma projects do, and in fact, Lean Six Sigma provides a management structure and methodology that turn systematic improvement of routine operations into a routine operation itself. Traditionally, Lean Six Sigma projects have been mainly targeted at improvement of manufacturing processes and backoffice processes in the service industry. But sales, marketing, accounting, product and process development, a physician’s consulting hours are routine processes just as well, and Lean Six Sigma projects are increasingly deployed in improving their quality and efficiency as well.

Direct benefits of Lean Six Sigma projects consist of benefits derived from customer satisfaction and cost advantages. Cost advantages can take the form of efficiency improvement (reduced workforce, enhanced equipment utilization), unnecessary cost and capital expenditure avoidance, or reductions of cash being tied up in inventory or elsewhere. By addressing product and service quality, making delivery more reliable, and by better marketing and sales processes, superior customer satisfaction can result in growth of revenue or market share or in reduced price sensitivity. In the last decades there have been many case studies and reports on the effects of Lean Six Sigma projects. Examples of reported operational performance improvements are among others process cycle time (Shah et al. 2008), profitability and customer satisfaction (Braunscheidel et al. 2011), employee satisfaction (Schön et al. 2010) and competitive advantage (Choi et al. 2012).

The strategic value of Lean Six Sigma

Lean Six Sigma projects improve efficiency and quality, thus increasing value for customers while simultaneously reducing costs. At a first glance one could think that running Lean Six Sigma projects would automatically improve a company’s profitability. But the conversion of efficiency and quality improvement into sustainable profitability appears to be all but straightforward. The crucial point is that Lean Six Sigma should be integrated in a strategy. That way, tactical gains (that is, successful projects) can be converted in strategic advantages (that is, sustainable profitability or growth).

Since 1900, productivity has increased by enormous factors. Prices (corrected for inflation) have dropped in industries like consumer electronics and automotive, while at the same time quality has improved by incredible rates. Depending on the industry, the race of making operations more and more effective and efficient has either been on its way for many years, or has only recently gained momentum. In both cases, organizations cannot afford to fall behind. No matter how many other competitive advantages a company has, they will be outweighed if the gap in quality and efficiency becomes large. Lean Six Sigma or a similar approach is a necessity to avoid falling behind in this race.

At the same time, the gains of the unbelievable increases in quality and efficiency have gone almost entirely to consumers: there have been only few businesses that managed to convert them into sustainable higher profits. In other words: while improvement of quality and efficiency may be vital to avoid competitive disadvantage, it is all but straightforward to convert it into competitive advantages and sustained profitability. The reason is that superior operations are not something unique. Competitors are likely to be striving for the same, and there is no reason why they should not succeed in achieving a similar or even better level of quality and efficiency. Standards are getting higher, and no companies alternate in taking the lead. This leads to price erosion: when most companies achieve the same improvement in their operations, principles of competition and market ensure that prices decrease by the same amount as costs, leaving industry with the same profit margins, and feeding spilling over gains to consumers. Moreover, in many industries companies are competing with each other over the same issues and by copying each other’s moves and best practices (everybody implements the same approaches, be it TQM, JIT, BPR, or Lean Six Sigma) look more and more alike (so called competitive convergence). This sort of competition is destructive for companies participating in it, and the warning is that competition over quality and efficiency alone is a poor substitute for a competitive strategy. Hayes and Pisano (1994) and Porter (1996) provide interesting discussions on this topic.

Competitive strategy is what companies do to avoid this competitive convergence. Having said that Lean Six Sigma is unlikely to lead to strategic advantages “automatically”, it must be stressed that the program offers considerable opportunities for strategic advantage. A company’s strategy can be leveraged with Lean Six Sigma projects playing the role of tactical moves. A business with a good strategy knows where it is heading, knows the key factors that determine its success, and knows where to invest its efforts. That gives a list of crucial improvement areas, and this is where Lean Six Sigma comes in; as an effective methodology for delivering the improvements that the business strategy dictates as essential.

This is an important point: Lean Six Sigma should not be started as a substitute for a good strategy. Instead, it can be used to implement, execute, and leverage the strategy that the business has designed, and it should be aligned and integrated with it. Running projects guided by strategic direction ensures that improvements will be achieved where they really make a difference. It ensures the various projects are integrated and reinforce each other. And it ensures projects are aligned with the organization. Moreover, turning the results of a successful project (shorter lead times, minimized processing time, better quality) into economic benefits (higher profits, lower costs, increased market share) reaches beyond the scope of the project and the domain of the people who run it. If Lean Six Sigma projects are not related to the strategy of the business, they will result in tactical wins (projects that achieve their objectives), but have no strategic effect on the company.

In short: without strategic integration there are successful but scattered and partly counteractive projects; with a proper strategic focus there is unification, integration and mutual reinforcement, and thus a potential for performance.

Lean Six Sigma, innovation and competence building

Efficiency has been the focus of Western industry up until the 1980s. Many initiatives in the last decades of the 20th century sought to optimize quality. The driver for growth and profitability in the West in the 21st century is likely to be innovation. In the previous century innovation has been one of the most important drivers of economic growth. We are not only talking of the R&D type of innovations: it is especially the small process adjustments and product modifications whose cumulative impact drives quality and efficiency, and ultimately productivity and economic growth. And not only production processes and products are continuously improved: frequent innovations in business models, sales strategies, accounting procedures and hospital admittance policies are just as crucial.

In the current economy competitiveness is less and less determined by static advantages such as the level of quality and efficiency, and more and more by the rate at which these improve. Continuous improvement, flexibility, and the ability to adapt to new circumstances and opportunities have become crucial competences in a highly dynamic and quickly evolving economy. Consequently, it is no longer enough to have an R&D department developing new products and processes, and senior management setting out a strategy. What 21st century organizations need is a company-wide host of systematic innovators: employees are working in and managing the processes of the organization, and are also well trained in the skills needed to continuously improve these processes. What is needed in addition are the organizational structures and facilities needed to carry out improvements effectively. Lean Six Sigma offers a template for designing these organizational structures (see Chapter 2). Further, the Lean Six Sigma training curriculum teaches BBs and GBs the skills needed to be an effective innovator (see part II of this book). To reap the full benefits that Lean Six Sigma can bring, it is important to really integrate Lean Six Sigma in the organization. The values that Lean Six Sigma embodies (continuous innovation and improvement, a focus on the customer, data-driven decisions, a relentless focus on the vital issues that determine performance) must find wide recognition and acceptance in the organization. Lean Six Sigma activities must find a place alongside and integrated with regular work. Lean Six Sigma experts (BBs and MBBs) must be dispersed over the organization. Lean Six Sigma project selection must be fully in line with the organization’s strategic focal points.

An organization that has truly integrated Lean Six Sigma is a different organization, and better equipped to face the challenges of the 21st century. In other words: Lean Six Sigma represents a competence that the organization can develop and, once mastered, can be a unique, non-imitable and vital resource for performance and competitiveness (Anand et al., 2009). But this competence is not built overnight. Integrating Lean Six Sigma in an organization requires careful and tenacious leadership from senior management, and a commitment to a long trajectory in which the organization learns Lean Six Sigma’s skills and attitudes. Note that this is good news: because the development of Lean Six Sigma competences is a demanding enterprise, it is an opportunity to set oneself apart from competitors and outperform them. Exhibit 1.1 describes what this trajectory looked like at General Electric Company.

Exhibit 1.1: Building Six Sigma competences at General Electric

In its annual reports GE states over and over again that it sees its learning, sharing and action-driven culture as its path to sustainable competitive advantage. This vision is stated, for example, in the 1998 Annual Report as follows: ‘That appetite for learning, and the ability to act quickly on that learning, will provide GE with what we believe is an unsurmountable and sustainable competitive advantage.’ This learning culture was built from the 1980s onwards by eradicating the many organizational, hierarchical and cultural boundaries that were seen as the main impediments to learning. As a first step, GE started the Work-Out initiative, supplemented by a reward system supporting learning behavior. In the second half of the 1990s it started the Six Sigma initiative, which built further on the idea to exploit a learning culture as competitive advantage. Six Sigma was more easily incorporated in GE’s culture than at other companies. The 1997 Annual Report states: ‘GE had another huge advantage that accelerated our quality effort: we had a Company that was open to change, hungry to learn and anxious to move quickly on a good idea’. Determined to use Six Sigma to build lucrative competences, GE linked Six Sigma to leadership development. The Black Belt role at GE is a full time, but temporary assignment (typically two years). GE had the clear intention to use the Six Sigma training and the temporary assignment as a Black Belt to develop future business leaders who have a ‘continuous improvement’ mindset. In the words of the then CEO Jack Welch: ‘The generic nature of a Black Belt assignment, in addition to its rigorous process discipline and relentless customer focus, makes Six Sigma the perfect training for growing 21st century GE leadership’ (2000 Annual Report), and: ‘Six Sigma is quickly becoming part of the genetic code of our future leadership’ (1997 Annual Report). Here we see an example of a company that integrates Six Sigma in its strategy and embarks on a year-long trajectory of competence building.