PowerPoint Presentation

October 2008

Process ImprovementJohn Rodgers, Managing Director, SSA & Company

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Who We AreWho We Are

Developed in the 1980s, Six Sigma was created on the revolutionary premise that higher quality should lead to lower costs

• For most businesses, the cost of poor quality represents 15-25% of revenues in rework, customer service, Q&A, etc

In 1994, SSA was founded by the progenitors of Six Sigma to deploy at F100 companies

• Started with deployments at GE, Allied-Signal, Dow, and Ford

In 2004, SSA welcomed new investors/managers to its team

• Former CEOs of Hyatt, Office Depot, Goldman Sachs (Vice-Chair)

As the longest operating Six Sigma consulting/training firm, SSA has proof-tested our approach for success

• Developing skills to solve business problems vs. ordinary corporate training

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Client ImpactClient Impact

$277 million 2 years

Source: Company annual reports, 10-Ks

Financial Benefits Time Frame

$750 million 4 years

$1.7 billion 3 years

$1.7 billion 3 years

$3.0 billion 4 years

$4.0 billion 4 years

$12 billion 5 years

$3.5 billion 7 years

Quantitative Results Cultural Impact

Yesterday…“Six Sigma has created the biggest opportunity for growth, increased profitability, and individual employee satisfaction in the history of our company”Jack Welch, former CEO GE

…and Today

“Toyota Financial Services is using SPM to compliment our existing Kaizen program to accelerate growth in what is already a world-class culture”George Borst, President Toyota Financial Services

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Healthcare IndustrialConsumer

FinancialTechnologyEnergy

…As Well as a Broad Range of the F500…As Well as a Broad Range of the F500

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Six Sigma EvolutionSix Sigma Evolution

Copyright (c) 2006Six Sigma Academy International, LLCAll rights reserved; for use only in compliance with SSA license.

1980 1990 2000 2008

Originated in Motorola

Six Sigma Academy founded by Dr. Mikel

Harry

Six Sigma Commercialized –GE and Allied Signal Deployed

Deployed in variety of service industries,

including Merrill Lynch Emerging in Healthcare,

Insurance and Other Professional

Services

Not just for manufacturing anymore!!

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What is Six Sigma?What is Six Sigma?

“Six Sigma is a defined and disciplined business methodology to increase customer satisfaction and profitability by streamlining

operations, improving quality and eliminating defects in every process company-wide.”

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The Premise: Cost of Poor QualityThe Premise: Cost of Poor Quality

Cost of Poor Quality PPM Sigma Level

30-40% revenue 308,537 2σ

20-30% revenue 66,807 3σ

15-20% revenue 6,210 4σ

10-15% revenue 233 5σ

less than 10% revenue 3.4 6σ

Non-competitive

Industry average

World class

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Is 99% Good Enough?Is 99% Good Enough?

“Voice Of Customer” data should drive process performance

99% Good (3.8 Sigma) 99.99966% Good (6 Sigma)

20,000 lost articles of mail/hour Seven articles lost per hour

Unsafe drinking water for almost 15 minutes each day

One unsafe minute every seven months

5,000 incorrect surgical operations per week

1.7 incorrect operations per week

Two short or long landings at most major airports each day

One short or long landing every five years

200,000 wrong drug prescriptions each year

68 wrong prescriptions per year

No electricity for almost seven hours each month

One hour without electricity every 34 years

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Can We Inspect Our Way To Six SigmaCan We Inspect Our Way To Six Sigma

Task: Count the number of times the 6th letter of the alphabet appears in the following

text.

The necessity of training farm hands for first class farms in the fatherly handling of farm live stock is foremost in the eyes of farm owners. Since the forefathers of the farm owners trained the farm hands for first class farms in the fatherly handling of farm live stock, the farm owners feel they should carry on with the family tradition of training farm hands of first class farmers in the fatherly handling of farm live stock because they believe it is the basis of good fundamental farm management.

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A Good Process Involves A Holistic ViewA Good Process Involves A Holistic View

S

Suppliers

I

Inputs

O

Outputs

C

Customers

P

Process

Start with understanding the process from the customer’s perspective…

…Improve by adjusting key process inputs and flow

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Data Is The Foundation Of The Six Sigma Data Is The Foundation Of The Six Sigma

Data is used to classify, describe, improve, or control objects, situations, or phenomenon

Levels of Analysis:1. We only use experience, not data

2. We collect data, but just look at the numbers

3. We group the data so as to form charts and graphs

4. We use census data with descriptive statistics

5. We use sample data with descriptive statistics

6. We use sample data with inferential statistics

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The RolesThe Roles

• Provides executive oversight for all Six Sigma activities

• Controls resources within the functional group

• Drives the Six Sigma initiative• Subject matter

expertise as needed

• Owns project cluster• Breaks down barriers that

prevent project progress• Review projects• Drives projects to

completion• Communication

• Owns the Six Sigma Project• Leads Project Team• Reports progress to

Project Champion • Deployment Support• DMAIC Instruction• DMAIC Mentoring

BusinessChampionBusinessChampion

Team Members

Team Members

Project ChampionProject

Champion CoachesCoaches

BlackBelt

BlackBelt

Deployment Champion

Deployment Champion

• Set Six Sigma Strategy• Build Infrastructure• Support Overall Deployment

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Reducing Variation Reducing Variation

Typically A Few Process Input Variables Have An Extraordinary Influence On The Process Output

The basic premise of variation reduction is that sources of variation can be:

Identified

Quantified

Eliminated or controlled

Managing Process Inputs …

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Variation vs. AveragesVariation vs. Averages

Example 1: Average time to approve is 45 days, most accounts approved between 35 and 55 days

Example 2: Average time to approve is 45 days, most policies approved in no more than 47 days

Average Tells Little About The Customer Experience

Output Variation30 45 60

Account Approval Process ExampleMean

Example #1

Example #2

Days

*

* Represents fabricated example

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Process EntitlementProcess Entitlement

Use LSS to shift overall performance to Entitlement, drivingshort-term improvements in cost and quality

Only after the Entitlement is achieved should significant investments be made in process redesign or technology

MeanEntitlementPerformance

Shift

Upper Specification Limit

Output Variation30 45 60Days

* Represents fabricated example

Account Approval Process Example *

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Improving PerformanceImproving Performance

Off-Target Variation

On-Target

CenterProcess

Reduce Spread

X XXX

XXXXX

XX

X X

X

X

X

XX

X

X

XXX

XX

XXXX

XXXXXXX XX

Copyright (c) 2006Six Sigma Academy International, LLCAll rights reserved; for use only in compliance with SSA license.

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Dynamics Of Execution StrategyThe Funnel EffectDynamics Of Execution StrategyThe Funnel Effect

Optimized Process

Define Phase

Measure

Phase

Analyze

Phase

Improve

Phase

Control

10 – 15 Xs

8 – 10 KPIVs

4 – 8 Key KPIVs

3 – 6 Key KPIVs

30 – 50 Inputs (X)

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DMAIC MethodologyDMAIC Methodology

Select Output CharacteristicsDefine Performance Standards

Define

Determine Process CapabilityImplement Process Controls

Control

Discover Variable RelationshipsEstablish Operating TolerancesValidate Measurement System

Improve

Identify Variation SourcesScreen Potential Causes

Analyze

Validate Measurement SystemEstablish Process CapabilityDefine Performance Objectives

Measure

ANALYZE

MEASURE

DEFINE

CONTROL

IMPROVE

IDENTIFY PROJECTS

STANDARDIZE / LEVERAGE SOLUTIONS

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Process Improvement Under Attack!!Process Improvement Under Attack!!

Why Six Sigma Is on the DownslopeHarvard Business Online - January 10, 2008

3M's Innovation CrisisBusiness Week – June 11, 2007

Six Sigma: So Yesterday?Business Week – June 11, 2007

Debate: Six Sigma vs. InnovationBusiness Week – February 27, 2007

Is Six Sigma a hard-sell now?Chief Executive Magazine - Oct/Nov 2007

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“We couldn’t deploy Six Sigma the same way today as we did at GE in the 90’s. Business environments have changed significantly since then.”

– Jack Welch

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Why GE’s model is outdatedWhy GE’s model is outdated

New opportunities:

• Availability of information (financial, operating data)

• More autonomy and leverage at lower levels in the organization

• Well developed frameworks and tools

• Existing capabilities and skills enable jump-start to revitalize and customize process improvement efforts

New challenges:

• Existing operations are leaner –firms can’t support initiatives with armies

• Less top-down command and control from the C-suite

• Need results faster

• Risk-averse management

• Customers demanding better products, for less, faster…you only get one shot!

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A Revolution in Process Management:The New PrioritiesA Revolution in Process Management:The New Priorities

Alignment

• Everyone understands company strategy and methods to achieve it

1 Rapid Improvement

• No 5-year plans

• CEO and Board want change ASAP

• 30- to 90-day results

2 Employee Engagement

• Flexible processes

• Custom training

• Employee input

3

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Strategic Process Management(SPM)

A New Model to Meet Today's Business EnvironmentA New Model to Meet Today's Business Environment

Business Relationship Map (BRM)• Identify core

process• Assess cost,

time, quality metrics

• Craft fact-based roadmap

Rapid Improvement Project (RIP)• Attack critical

processes• 60- to 90-day

projects• Clearly defined

goals• Integrated LSS

framework

On Demand Training• Flexible,

responsive• Program

management• Just-In-Time• Create culture of

process improvement

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SPM Engagement ModelSPM Engagement Model

SCOPE EXECUTE ROLL OUT & SUSTAIN

1 week 60-90 days 3-12 monthsFinancial impact accrues

• Develop BRM• Understand how

processes add business value

• Align strategy and processes

• Conduct RIPs to improve processes in a systematic way

• Align organization/ engage employees

• Replicate across small number of value streams

• Develop roadmap• Add more BU’s,

locations, etc.• Foster continued

improvement culture• Train and coach

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The following are trademarks and service marks of Six Sigma Academy International, LLC: Breakthrough Lean®, Breakthrough Strategy®, Breakthrough Value Services®, Breakthrough Change StrategySM, Breakthrough DesignSM, Breakthrough DiagnosisSM, Breakthrough ExecutionSM, Breakthrough Sigma LeanSM, Breakthrough Six SigmaSM, Breakthrough Software DesignSM, FASTARTSM, Six Sigma Gold BeltTM, SOLVING YOUR BUSINESS PROBLEMS FOR THE LAST TIMESM. Six Sigma is a federally registered trademark of Motorola, Inc. MINITAB is a federally registered trademark of Minitab, Inc. SigmaFlow is a federally registered trademark of Compass Partners, Inc. VarTran is a federally registered trademark of Taylor Enterprises.

SSA & Company630 Fifth Ave., Suite 1900

New York, NY 10111Tel. (212) 332-3797www.ssaandco.com