Innovation in management system by Six Sigma An empirical study of world-class companies

Introduction
 

Presently companies are challenged due to technology advancement, customer expectation evolution, and short product life cycles. Innovation plays a pivotal role for gaining competitive advantages. Innovation in management system is believed as one of the crucial competitive advantages for enhancing and sustaining business performance. Innovation in management system is defined as improving the way people are managed and works are organized as a response to the changing environment. However, due to its complexity, it is not easy to innovate. There is a lot of difficulty in understanding the main factors, such as management strategies, degree of company integration, and resources. Hence, innovation needs a systematic approach to be understood and effectively applied.

On the other hand, Six Sigma, as a management tool, provides a systematic approach for enhancing performance. The emergence of Six Sigma has become one of the major developments in management practices. Six Sigma has been widely accepted as a management model that will guarantee in attaining competitive advantage if implemented successful.

Impact of Six Sigma on management system

The goal of innovation is the positive changes whereby a company improved. This impact of Six Sigma is derived from two systematic processes: the define, measure, analyze, improve and control process (DMAIC) problem-solving methodology and the design for Six Sigma (DFSS) approach. DMAIC is more focused on problem solving of existing condition in organization for improving performance and cost reduction. Meanwhile, DFSS tends to be more proactive by designing new products, services, and business processes. Therefore, it is believed that DMAIC methodology allows for incremental innovation because it is based on existing condition to promote an improvement. The DFSS approach is more of a radical innovation by redesign or design new products, services, and business processes, according to customer requirement and expectations.

This paper uses the two Six Sigma processes to analyze the application of Six Sigma on innovation in management system. This section discusses the positive impact of Six Sigma in management system based on Osada’s management system model. This model classified management system into driver, enabler, and performance, as follows:

 Driver: Company direction, vision, mission, objectives, strategy, and organizational   expectations.

 Enabler:  Soft infrastructure, stock resources, process, and flow resources.

 Performance: Output, outcome, and financial result.

Sharpening leader development method

 Six Sigma training was an ironclad prerequisite for promotion to any professional or managerial positions in the company and a requirement for any award of stock options. In addition, all professional, supervisory, and managerial employees must be at least green belt (GB) trained and have done a project. The same as GE, Du Pont has required BB and GB certification as a requirement for promotion to the ranks of management, while Caterpillar utilized a structured process to select high-potential employees to become Six Sigma BB. After two-year assignments, mostly BBs are promoted to higher level positions within Caterpillar operations and included in the succession management process. Honeywell was also proactively assigning high-talent employees to important Six Sigma project, as part of developing the next generation of leaders.

Improving the effectiveness of training. This is done by linking training process and outcome of the project with financial outputs.

Improving employee spirit. This is done by connecting the reward system (financial benefit and career promotion) with the project accomplishment to energize people on Six Sigma initiatives. The promotions are mostly awarded for team leader, while financial benefit is mostly awarded for team members.

^.

 Enhancing the quality of communication

Six Sigma has a standardize methodology and a clear step of project accomplishment. Thus, it is easy to be understood, followed, and shared within the business units. The successful and ongoing projects are being recorded by software for tracking Six Sigma-related progress and information dissemination. This system is able to store and share the collected data among related units in company wide.

Upgrading production process.

 Six Sigma projects allow companies to significantly upgrade the production process with less investment.

^.Improving inventory utilization.

 Increasing inventory utilization and production speed by reducing variations and removing wasted steps from manufacturing

^.Enhancing elimination of non-value-added process.

 One of Du Pont projects, namely the solutions for document processing in Major Litigations, has eliminated ten of the 14 steps previously required. As a result, the unit cost of processing one page was reduced by 53 percent.

Providing significant financial benefit. 

 The Six Sigma has driven undoubtedly contributions to profitability improvements

Uniqueness of Six Sigma as innovation tool in comparison with TQM

There are differences between Six Sigma and TQM in areas such as financial performance, time frame, objective, origin, infrastructure, and methodology. A Six Sigma project is highly related to strategic planning based on priorities to changes the daily activities of an organisation. Hence, it decreases the complexity and provides focus on specific and strategic problems to solve. Six Sigma has defined two types of projects which are DMAIC projects for providing corrective action to existing product, services, and business processes and DFSS project for generating which provides more radical approach to create new value. Moreover, each type of project is conducted through a difference methodology according to the nature of the problem to enhance possibility for success. On the other hand, TQM does not provide an infrastructure like Six Sigma to decrease its complexity. However, TQM countermeasures the complexity through kaizen, a continuous improvement process, that is smaller scale, and people based by rotating PDCA methodology. TQM uses total employee participation to accumulate these improvements in company wide. Thus, in total will provide significant improvements.

Therefore, the following discussion is intended to clarify the strength of Six Sigma as an innovation tool in management systems compared to TQM. The following findings have been identified from the Six Sigma characteristics which can provide additional critical distinction between Six Sigma and TQM.

(1) Disseminating commitment

At the early time of implementation, Six Sigma leverages firstly to early adopters. This method has low resistance and provides an experience to learn from mistakes. This step is part of change acceleration process (CAP) step. According to the CAP model, the effectiveness (E) of change initiatives is equal to the product of the quality initiatives (Q) of the technical strategy and the acceptance (A) of the strategy. The prerequisite of CAP is the involvement and skills of the leader. By utilizing CAP tools, the leader can deliver message of change to help decreasing the resistances of people through the following steps:

(1) creating a shared need;

(2) shaping a vision;

(3) mobilizing commitment;

(4) making change last;

(5) monitor process; and

(6) change systems and structures.

(2) Sustaining spirit

Six Sigma starts by focusing on solving strategic problems, which has a direct linkage with strategic plans within a limited time by assigning their very best people on a full-time basis. The success stories of Six Sigma projects, especially on the beginning of deployment, have an impact on strengthening opinion that Six Sigma really works. Since Six Sigma has also direct linkage with financial criteria, it is easy to communicate its benefit and tie some percentage of financial reward to the achievements. In comparison with TQM, especially at the very beginning implementation, TQM did not treat improvements of the project base, thus it has no specific time accomplishment. TQM does not assign specific elite team members, since their main focus was to gain a total employee involvement Six Sigma has a unique way of introducing projects and innovation in management systems.

Conclusion

The Six Sigma initiative has a comprehensive impact on its driver, enabler, and performance cluster, such as directing the organization way, enhancing the effectiveness of strategic project management, establishing a culture of data-driven approach, sharpening the way to develop leader, and so on. Six Sigma has defined two types of projects which are DMAIC projects for providing corrective action to existing product, services, and business processes and DFSS project for creating new value which provides more radical approach.

In comparison with TQM, Six Sigma has at least two additional critical differences:

(1) disseminating commitment; and

(2) sustaining spirit.

These aspects are critical for innovation in management system as to deal with people’s resistance through enthusiastic early adopter to pioneer the deployment of Six Sigma. As a result, successful initial projects help to clarify for others the real business value of Six Sigma. In sustaining spirit Six Sigma creates a milestone to maintain interest and commitment for long-term activities through accomplished projects and provides direct financial reward for successful projects.

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