six-sigma

What Is Six Sigma And Why It Matters In Business

Six Sigma is a data-driven approach and methodology for eliminating errors or defects in a product, service, or process. Six Sigma was developed by Motorola as a management approach based on quality fundamentals in the early 1980s. A decade later, it was popularized by General Electric who estimated that the methodology saved them $12 billion in the first five years of operation.

Understanding Six Sigma

The approach uses statistical principles to reduce errors and is based on the Greek letter sigma, which measures standard deviation in a population. In Six Sigma, the standard deviation is a measure of the variation in a data set collected about a specific process.

If a process error is governed by limits that separate good and bad process outcomes, the Six Sigma approach has a process mean (average) that is six standard deviations from each limit. This, Motorola found, provided enough buffer for natural variation in process outcomes to fall within the lower and upper limits.

Example

To illustrate this concept more clearly, consider a company that manufactures basketball hoops. To avoid process defects, the hoop must have a diameter of between 17.8 and 18.2 inches. The average hoop width is therefore 18.0 inches, so the standard deviation must be 0.033 or lower assuming a normal distribution of hoop sizes.

In manufacturing, Six Sigma equates to 3.4 defects per million units. But it is important to note that this is a goal businesses must strive to reach through continued improvements. For example, the basketball hoop company may begin their journey at Sigma Level 4 (6,210 defects per million units). They may see significant benefits from improving their processes by moving to Sigma Level 5 (233 defects).

The Six Sigma methodologies

Six Sigma is driven by specific methodologies or roadmaps to improvement. One of the most widely used is a framework with the acronym DMAIC: 

  1. Define. To deliver maximum value, the business must understand customer needs and the factors that drive loyalty. It must define quality in terms of project goals and market requirements. What are the benchmarks that must be attained?
  2. Measure. Understand the current process by collecting key performance data.
  3. Analyze data. Businesses should use the 80/20 rule to determine the 20% of process errors responsible for 80% of the defects.
  4. Improve processes. Fixes should then be implemented and tested to verify effectiveness.
  5. Control future implementations. Lastly, preventative action must be taken to ensure that process errors do not repeat themselves. This can be done through equipment upgrades or the establishment of new procedures or protocols.

Six Sigma implementation roles

Six Sigma also seeks to establish clear roles by way of a hierarchical approach to quality management. To help visualize this hierarchy, Six Sigma borrows the concept of colored belts from martial arts.

Here is a look at each level:

  • Executive leadership – or those responsible for establishing the vision of Six Sigma implementation at the organization level.
  • Champions – chosen by executive leadership, champions ensure a cohesive and collaborative approach to Six Sigma principles. 
  • Master Black Belts – chosen by champions and spending most of their time guiding Green or Black Belts or working with Champions. Among their many responsibilities is ensuring process consistency.
  • Black Belts – primarily responsible for executing strategy. They may lead certain tasks.
  • Green Belts – encompassing those individuals who are new to the Six Sigma concept. They have begun the process of on-the-job training concurrent with their other duties.

Key takeaways

  • Six Sigma is an approach to eliminating or reducing process errors based on statistical analysis.
  • Sigma Level 6 equates to 3.4 defects per million units produced, which should be the goal of every business. However, businesses that adopt Six Sigma principles receive significant process improvements by attaining Sigma Level 4 or 5.
  • Six Sigma can be implemented using the DMAIC method. Above all, decision-makers must define quality benchmarks and then use the Pareto Principle to focus on high-impact process errors.

Connected Agile Frameworks

AIOps

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AIOps is the application of artificial intelligence to IT operations. It has become particularly useful for modern IT management in hybridized, distributed, and dynamic environments. AIOps has become a key operational component of modern digital-based organizations, built around software and algorithms.

Agile Methodology

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Agile started as a lightweight development method compared to heavyweight software development, which is the core paradigm of the previous decades of software development. By 2001 the Manifesto for Agile Software Development was born as a set of principles that defined the new paradigm for software development as a continuous iteration. This would also influence the way of doing business.

Agile Project Management

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Agile project management (APM) is a strategy that breaks large projects into smaller, more manageable tasks. In the APM methodology, each project is completed in small sections – often referred to as iterations. Each iteration is completed according to its project life cycle, beginning with the initial design and progressing to testing and then quality assurance.

Agile Modeling

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Agile Modeling (AM) is a methodology for modeling and documenting software-based systems. Agile Modeling is critical to the rapid and continuous delivery of software. It is a collection of values, principles, and practices that guide effective, lightweight software modeling.

Agile Business Analysis

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Agile Business Analysis (AgileBA) is certification in the form of guidance and training for business analysts seeking to work in agile environments. To support this shift, AgileBA also helps the business analyst relate Agile projects to a wider organizational mission or strategy. To ensure that analysts have the necessary skills and expertise, AgileBA certification was developed.

Business Model Innovation

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Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.

Continuous Innovation

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That is a process that requires a continuous feedback loop to develop a valuable product and build a viable business model. Continuous innovation is a mindset where products and services are designed and delivered to tune them around the customers’ problem and not the technical solution of its founders.

Design Sprint

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A design sprint is a proven five-day process where critical business questions are answered through speedy design and prototyping, focusing on the end-user. A design sprint starts with a weekly challenge that should finish with a prototype, test at the end, and therefore a lesson learned to be iterated.

Design Thinking

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Tim Brown, Executive Chair of IDEO, defined design thinking as “a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.” Therefore, desirability, feasibility, and viability are balanced to solve critical problems.

DevOps

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DevOps refers to a series of practices performed to perform automated software development processes. It is a conjugation of the term “development” and “operations” to emphasize how functions integrate across IT teams. DevOps strategies promote seamless building, testing, and deployment of products. It aims to bridge a gap between development and operations teams to streamline the development altogether.

Dual Track Agile

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Product discovery is a critical part of agile methodologies, as its aim is to ensure that products customers love are built. Product discovery involves learning through a raft of methods, including design thinking, lean start-up, and A/B testing to name a few. Dual Track Agile is an agile methodology containing two separate tracks: the “discovery” track and the “delivery” track.

Feature-Driven Development

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Feature-Driven Development is a pragmatic software process that is client and architecture-centric. Feature-Driven Development (FDD) is an agile software development model that organizes workflow according to which features need to be developed next.

eXtreme Programming

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eXtreme Programming was developed in the late 1990s by Ken Beck, Ron Jeffries, and Ward Cunningham. During this time, the trio was working on the Chrysler Comprehensive Compensation System (C3) to help manage the company payroll system. eXtreme Programming (XP) is a software development methodology. It is designed to improve software quality and the ability of software to adapt to changing customer needs.

Lean vs. Agile

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The Agile methodology has been primarily thought of for software development (and other business disciplines have also adopted it). Lean thinking is a process improvement technique where teams prioritize the value streams to improve it continuously. Both methodologies look at the customer as the key driver to improvement and waste reduction. Both methodologies look at improvement as something continuous.

Lean Startup

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A startup company is a high-tech business that tries to build a scalable business model in tech-driven industries. A startup company usually follows a lean methodology, where continuous innovation, driven by built-in viral loops is the rule. Thus, driving growth and building network effects as a consequence of this strategy.

Kanban

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Kanban is a lean manufacturing framework first developed by Toyota in the late 1940s. The Kanban framework is a means of visualizing work as it moves through identifying potential bottlenecks. It does that through a process called just-in-time (JIT) manufacturing to optimize engineering processes, speed up manufacturing products, and improve the go-to-market strategy.

Rapid Application Development

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RAD was first introduced by author and consultant James Martin in 1991. Martin recognized and then took advantage of the endless malleability of software in designing development models. Rapid Application Development (RAD) is a methodology focusing on delivering rapidly through continuous feedback and frequent iterations.

Scaled Agile

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Scaled Agile Lean Development (ScALeD) helps businesses discover a balanced approach to agile transition and scaling questions. The ScALed approach helps businesses successfully respond to change. Inspired by a combination of lean and agile values, ScALed is practitioner-based and can be completed through various agile frameworks and practices.

Spotify Model

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The Spotify Model is an autonomous approach to scaling agile, focusing on culture communication, accountability, and quality. The Spotify model was first recognized in 2012 after Henrik Kniberg, and Anders Ivarsson released a white paper detailing how streaming company Spotify approached agility. Therefore, the Spotify model represents an evolution of agile.

Test-Driven Development

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As the name suggests, TDD is a test-driven technique for delivering high-quality software rapidly and sustainably. It is an iterative approach based on the idea that a failing test should be written before any code for a feature or function is written. Test-Driven Development (TDD) is an approach to software development that relies on very short development cycles.

Timeboxing

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Timeboxing is a simple yet powerful time-management technique for improving productivity. Timeboxing describes the process of proactively scheduling a block of time to spend on a task in the future. It was first described by author James Martin in a book about agile software development.

Scrum

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Scrum is a methodology co-created by Ken Schwaber and Jeff Sutherland for effective team collaboration on complex products. Scrum was primarily thought for software development projects to deliver new software capability every 2-4 weeks. It is a sub-group of agile also used in project management to improve startups’ productivity.

Scrum Anti-Patterns

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Scrum anti-patterns describe any attractive, easy-to-implement solution that ultimately makes a problem worse. Therefore, these are the practice not to follow to prevent issues from emerging. Some classic examples of scrum anti-patterns comprise absent product owners, pre-assigned tickets (making individuals work in isolation), and discounting retrospectives (where review meetings are not useful to really make improvements).

Scrum At Scale

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Scrum at Scale (Scrum@Scale) is a framework that Scrum teams use to address complex problems and deliver high-value products. Scrum at Scale was created through a joint venture between the Scrum Alliance and Scrum Inc. The joint venture was overseen by Jeff Sutherland, a co-creator of Scrum and one of the principal authors of the Agile Manifesto.

Read Also: Business Models Guide, Sumo Logic Business Model, Snowflake

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Read Next: OKR, Smart Goals, Balanced Scorecard, VTDF Framework, Jobs-To-Be-Done, Lean Methodology, Agile Methodology.

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