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.

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

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"