The Benchmarking Process in Simple Words

7 Steps to Better Benchmarking

To get the best results from this powerful performance improvement tool, you need a clear understanding of what it can do for you and a well-structured process for your initiatives.

Largely unheard of in the business world until the mid-1990s, when Xerox Corp. used it to enhance its competitiveness, benchmarking has evolved to become an essential element of the business performance management (BPM) toolkit and a key input to financial and business improvement efforts. Despite this, it remains one of the most widely misunderstood improvement tools. The word means different things to different people, and, as a result, benchmarking projects all too frequently fail to deliver on their promise of real results.

However, when executed correctly, benchmarking can be a powerful focus for change, driving home sometimes uncomfortable facts and convincing leaders of the need to embark upon improvement efforts. Benchmarking is a tool that enables the investigation and ultimately the achievement of excellence, based on the realities of the business environment rather than on internal standards and historical trends.

There are two good reasons for organizations to benchmark. First, doing so can help them to stay in business by enabling them to outperform similar organizations, including competitors. Second, it ensures that the organization is continually striving to improve its performance through learning. Benchmarking opens minds to ideas from new sources, both within the same industry and in unrelated sectors.

In this article, I offer a definition of benchmarking and discuss the discipline’s strategic role in the effective management of performance improvement.

What It Is, What It Isn’t

Let’s start with a look at what benchmarking is not. It’s not “industrial tourism,” in which superficial visits are undertaken in the absence of any point of reference or any real prospect of supporting the improvement process. It’s impossible to acquire detailed knowledge of an operation after only a quick glance or a short visit.

Benchmarking also should not be considered a personal performance appraisal tool. The focus should be on the organization, not the individuals within it.

Nor is it a stand-alone activity; to succeed, benchmarking must be part of a continuous improvement strategy. Organizations must ramp up their performance rapidly to remain competitive in business environments today, and the pace is further accelerated in sectors where benchmarking is commonplace, where businesses rapidly and continuously learn from one another. A prime example is the oil and gas industry, where companies have to respond with lightning speed to ever-increasing business, technological, and regulatory demands. The majority of the key players in this industry participate in focused benchmarking consortia annually.

Benchmarking is not just a competitive analysis. It goes much further than a simple examination of the pricing and features of competitors’ products or services; it considers not only the output, but also the process by which the output is obtained. And benchmarking is much more than market research, because it considers the business practices that enable the satisfaction of customer needs and thus helps the organization to realize superior business performance. Many definitions of benchmarking exist, each offering slight variations on common themes. Here’s my definition: Benchmarking is a systematic and continuous process that enables organizations to identify world-class performance and measure themselves against that. Its goals can be summarized as:

  • Identify world-class performance levels;
  • Determine the drivers of superior performance;
  • Quantify gaps between the bench marker’s performance and world-class performance;
  • Identify best practices in key business processes;
  • Share knowledge of best practices;
  • Build foundations for performance improvement

Benchmarking projects can be classified in many different ways — for example, by the subject matter of the analysis, by the type of participants, by data source, or by methodology. There’s internal and external benchmarking; competitive and noncompetitive benchmarking; functional, process, and strategic benchmarking; and database and consortium benchmarking. While different approaches have their pros and cons, and some are clearly more effective than others, they all should have the same ultimate objective: to help an organization improve its business performance.

Irrespective of the type of benchmarking an organization undertakes, a well-structured and systematic process is critical to success. The Juran 7-Step Benchmarking Process(Exhibit 1) has been developed over many years by the Juran Institute and has formed the basis of numerous annual benchmarking consortia since 1995. I’ll describe it here in terms of external consortium benchmarking, but the process is generic and equally applicable in principle to all types of benchmarking.

The process is divided into two phases. Phase 1 is a positioning analysis that provides the bench marker with a comprehensive study of the relative performance of all of the benchmarking participants and identifies any gaps between the benchmarker’s performance and that of “best-in-class” organizations:

  • Step 1: Preparation and planning.As with any other project, thorough preparation and planning are essential at the outset. Recognize the need for benchmarking, determine the methodology you’re going to use, and identify the participants    in         your project.
    • Step 2: Data collection. This stage involves deciding what you’re going to measure and how you’ll measure it. You need to define the benchmarking envelope — what is to be benchmarked and what is to be excluded. At this point, you can establish the metrics you intend to use; these, too, must be clearly and unambiguously defined in order to ensure comparability of the datasets that you will collect. Finally, you need to determine the most appropriate vehicle for data collection.
    • Step 3: Data analysis. The key activities here are the validation and normalization of data. Before you can perform any meaningful analysis, it’s essential that all data be validated to establish its accuracy and completeness. Some form of data normalization is usually required to enable like comparisons to be made between what may be very different operational subjects. Without it, direct comparisons of performance are normally impossible and may lead to misinformed conclusions. To be of value, the analysis must indicate the benchmarker’s strengths and weaknesses, determine (and, where possible, quantify) gaps between the benchmarker’s performance and the leaders’, and provide recommendations for the focus of performance improvement efforts.
    • Step 4: Reporting. The analysis must then be reported in a clear, concise, and easily understood format via an appropriate medium.

Unfortunately, many benchmarking exercises stop at this point. But to maximize the value of the initiative, organizations must go further: They must build an understanding of the practices that enable the leaders to attain their superior performance levels. This is the purpose of Phase 2 of the 7-step benchmarking process:

  • Step 5: Learning from best practices.In this step, the top-performing organizations share their best practices, to the mutual benefit of all of the benchmarkers. Of course, when some of the benchmarkers are true competitors, the options for sharing may be limited, and alternative approaches may be required to establish learning.
    • Step 6: Planning and implementing improvement actions. Once the learning points have been ascertained, each organization should develop and communicate an action plan for the changes that it will need to make in order to realize improvements. The learning points should feed into the organization’s strategic plan and should be implemented via its performance improvement processes.
    • Step 7: Institutionalizing learning. The insights that you’ve gained and the performance improvements that you’ve achieved must be fully embedded within the organization; it’s critical to ensure that the gains are rolled out throughout the business and sustained over time. Benchmarking can take place at the corporate, operational, or functional levels of the organization. Make sure that these levels are linked via a cascading series of interlinked goals to ensure systematic progress toward the vision.

Shaping the Strategic Plan

Organizations’ goals all too often fall short of stakeholder expectations. A primary contributor to this sad state of affairs is the fact that goal-setting tends to be based on past trends and current internal practices. The external perspective is frequently overlooked, yet customers’ expectations are driven by their experiences with the best providers in the industry and superior providers in other industries. Benchmarking can capture these external references and provide a basis for comparative analysis.

Exhibit 2 shows some ways in which benchmarking can help to shape an organization’s strategic direction. It depicts a typical strategic planning process for performance improvement that begins with an organization’s vision for the future:

  • The visionwill always be influenced to some extent by the organization’s business environment and what others have been able to achieve. Benchmarking supplies detailed analyses of this environment and a factual basis for understanding what it means to be world-class, thereby helping to bring the organization’s vision into focus.
    • Assessing current performance and measuring the distance from there to the vision are critical activities for ensuring an organization’s long-term sustainability. While many tools are available for measuring current performance, including market research and competitor analysis, benchmarking adds the ability to clarify the organization’s position in relation to both the external business environment and the vision and to identify performance gaps. It enables the organization to adjust its strategy so that it can close the gap between its current reality and its vision of the future.
    • Long-term plans or key strategies derived from the vision comprise strategic goals that address all aspects of the organization’s performance, including business process performance, product or service performance, competitive performance, and customer satisfaction. By necessity, these goals will be constantly evolving. Benchmarking analyses enable the organization to set these objectives based on the external reality.

How Good Do You Need to Be?

Benchmarking enables decision-makers to understand exactly how much improvement they’ll need to accomplish in order to achieve superior performance. Frequent and regular benchmarking helps you to create specific and measurable short-term plans that are based on current reality rather than historical performance, and which can support step-by-step improvements in performance over time. The objective is to overtake the top performers, turning a performance deficit into performance leadership.

An implementation process is required to convert long- and short-term plans into operational plans. You’ll need to know exactly how your specific strategic goals are to be met and who has responsibility for executing the necessary actions. You’ll want to calculate and allocate the resources required and schedule and control the implementation. The output from your benchmarking effort feeds into this effort by providing vital information about best practices.

Benchmarking is a powerful tool that can significantly enhance an organization’s ability to strategically manage its performance. It forces managers to consider the broader perspective, to learn from outstanding performers, and to push beyond their own comfort zones. By revealing the best practices of top-performing operations, it can place your organization firmly on the road to world-class leadership

 

Define Phase In DMAIC

Define Phase Introduction

Purpose

To have the team and its sponsor reach agreement on the scope, goals, and financial and performance targets for the project

What you need before you start

  • First draft of project charter from sponsor(s)
  • Resource allocation (time of team members, initial budget)

Deliverables

  1. A completed project charter (covering the problem statement, business impact, goals, scope, timeline, defined team)
  2. Documentation showing what customers (internal and external) are or will be affected by this project and what their needs are
  3. High-level process map(s), at least a SIPOC diagram
  4. Completed project plans. Requirements will vary by company but often include Gantt charts; stakeholder analysis; resistance analysis; risk analysis; action logs, responsibility assignments, and communication plans.
  5. Outcomes from the project launch meeting showing team consensus around project purpose, charter, deliverables, and team responsibilities 

Key steps in Define

  1. Review project charter. Have your team discuss the draft charter from sponsors. Get answers to questions. Negotiate compromises or adjustments to scope, resources, timing, team membership as needed.
  2. Validate problem statement and goals. Review existing data or other sources of information to confirm that the problem you’ve been given…
    • Exists
    • Is important to customers (collect the Voice of the Customer)
    • Is important to the business (collect Voice of the Business information)
    • Can reasonably be expected to be improved using Lean Six Sigma (DMAIC) methodologies
  3. Validate financial benefits. Use existing data to calculate current costs, profits, margins, or other financial metrics relevant to your project. Estimate the financial impact if you achieve the project goal, and verify that it meets management expectations.
  4. Create/validate process map and scope. Document the main steps of the process (with a SIPOC diagram) to verify project scope; see if data exists to provide baseline measures on time, defects/errors, rework, etc., for a value stream map.
  5. Create communication plan. Identify project participants and stakeholders (sponsors, customers, managers, process operators, etc.) and develop plans for keeping them informed about and/or involved in the project.
  6. Develop project plans (schedule, budget, milestones).
  7. Complete the Define gate review.

Gate review checklist for Define

  1. An updated Project Charter
    • Problem Statement detailing when the problem has been seen, what the problem is, the magnitude of the problem, and the impact or consequence of the problem (such as effect on customer Critical-to-Quality expectations). Make sure the problem statement focuses on symptoms only (not on causes or solutions).
    • Key stakeholders: Who are they? How will they be involved in the project? How will progress be communicated to them?
    • Business Impact reflecting expected financial benefits and assumptions.
    • Goal Statement clearly identifying the key output metric (Y) to be improved.
    • Verification of Project Scope: broad enough to achieve the project objectives yet narrow enough to be completed within the Project Plan timeframe.
    • High-level Project Plan showing the targeted completion date for the project and intermediate milestones.
    • List of team members representing key stakeholders, appropriate mix of skills, and knowledge (especially about the current process).
  2. Documentation on your customer knowledge
    • Primary external and internal customers identified
    • Voice of the Customer gathered
    • Customer needs evaluated for priority and importance (through Kano analysis)
    • Ability to measure customer requirements
  3. A high-level process map and/or SIPOC 
    • High-level map showing major steps or activities (details will come in Measure)
    • SIPOC map completed to identify key Suppliers, Inputs, Process boundaries, Outputs, Customers (should demonstrate that the process boundaries align with the project goals)
    • Key process output variables (KPOVs) such as time, quality, and cost metrics (to show process links to project goals)
    • Optional: Key data on time, delays, queues, defects—if you don’t gather these data here, you’ll be collecting them in Measure
  4. Detailed Project Management plans
    • More detailed schedule of activities, especially for Measure (using a Gantt chart, for example)
    • List of stakeholders who will be impacted by the project, and their expectations and concerns
    • Communications Plan for the identified stakeholders and their concerns
    • Risk management plans
    • Identification of barriers/obstacles that could hinder the team (will likely require help from the Black Belt and sponsors to overcome these barriers)

 

How to review Risk Management Process ????????

The purpose of risk management is to identify potential problems before they occur so that risk-handling activities may be planned and invoked as needed across the life of the product or project to mitigate adverse impacts on achieving objectives.

Risk management is a continuous, forward-looking process that is an important part of business and technical management processes. Risk management should address issues that could endanger achievement of critical objectives. A continuous risk management approach is applied to effectively anticipate and mitigate the risks that have critical impact on the project.

Effective risk management includes early and aggressive risk identification through the collaboration and involvement of relevant stakeholders. Strong leadership across all relevant stakeholders is needed to establish an environment for the free and open disclosure and discussion of risk.

Although technical issues are a primary concern both early on and throughout all project phases, risk management must consider both internal and external sources for cost, schedule, and technical risk. Early and aggressive detection of risk is important because it is typically easier, less costly, and less disruptive to make changes and correct work efforts during the earlier, rather than the later, phases of the project.

Risk management can be divided into three parts: defining a risk management strategy; identifying and analyzing risks; and handling identified risks, including the implementation of risk mitigation plans when needed.

For the purpose of this review, please address the following points:

  1. Demonstrate that you have a process to determine risk sources and categories. Identification of risk sources provides a basis for systematically examining changing situations over time to uncover circumstances that impact the ability of the project to meet its objectives. Risk sources are both internal and external to the project. As the project progresses, additional sources of risk may be identified. Establishing categories for risks provides a mechanism for collecting and organizing risks as well as ensuring appropriate scrutiny and management attention for those risks that can have more serious consequences on meeting project objectives.

Typical work products would include: (1) risk source lists (external and internal) and (2) risk categories lists.

  1. Demonstrate that you have a process to define the parameters used to analyze and categorize risks, and the parameters used to control the risk management effort. Parameters for evaluating, categorizing, and prioritizing risks typically include risk likelihood (i.e., the probability of risk occurrence), risk consequence (i.e., the impact and severity of risk occurrence), and thresholds to trigger management activities.

Risk parameters are used to provide common and consistent criteria for comparing the various risks to be managed. Without these parameters, it would be very difficult to gauge the severity of the unwanted change caused by the risk and to prioritize the necessary actions required for risk mitigation planning.

Typical work products would include: (1) risk evaluation, categorization, and prioritization criteria and (2) risk management requirements (control and approval levels, reassessment intervals, etc.).

  1. Demonstrate that you have a process to establish and maintain the strategy to be used for risk management. A comprehensive risk management strategy addresses items such as: (1) The scope of the risk management effort, (2) Methods and tools to be used for risk identification, risk analysis, risk mitigation, risk monitoring, and communication, (3) Project-specific sources of risks, (4) How these risks are to be organized, categorized, compared, and consolidated, (5) Parameters, including likelihood, consequence, and thresholds, for taking action on identified risks, (6) Risk mitigation techniques to be used, such as prototyping, simulation, alternative designs, or evolutionary development, (7) Definition of risk measures to monitor the status of the risks, and (8) Time intervals for risk monitoring or reassessment.

The risk management strategy should be guided by a common vision of success that describes the desired future project outcomes in terms of the product that is delivered, its cost, and its fitness for the task. The risk management strategy is often documented in an organizational or a project risk management plan. The risk management strategy is reviewed with relevant stakeholders to promote commitment and understanding.

A typical work product would be the project risk management strategy.

  1. Demonstrate that you have a process to identify and document the risks. The identification of potential issues, hazards, threats, and vulnerabilities that could negatively affect work efforts or plans is the basis for sound and successful risk management. Risks must be identified and described in an understandable way before they can be analyzed and managed properly. Risks are documented in a concise statement that includes the context, conditions, and consequences of risk occurrence.

Risk identification should be an organized, thorough approach to seek out probable or realistic risks in achieving objectives. To be effective, risk identification should not be an attempt to address every possible event regardless of how highly improbable it may be. Use of the categories and parameters developed in the risk management strategy, along with the identified sources of risk, can provide the discipline and streamlining appropriate to risk identification. The identified risks form a baseline to initiate risk management activities. The list of risks should be reviewed periodically to reexamine possible sources of risk and changing conditions to uncover sources and risks previously overlooked or nonexistent when the risk management strategy was last updated.

Risk identification activities focus on the identification of risks, not placement of blame. The results of risk identification activities are not used by management to evaluate the performance of individuals.

There are many methods for identifying risks. Typical identification methods include (1) Examine each element of the project work breakdown structure to uncover risks; (2) Conduct a risk assessment using a risk taxonomy. Interview subject matter experts; (3) Review risk management efforts from similar products. Examine lessons-learned documents or databases; (4) Examine design specifications and agreement requirements.

A typical work product would be a list of identified risks, including the context, conditions, and consequences of risk occurrence.

  1. Demonstrate that you have a process to evaluate and categorize each identified risk using the defined risk categories and parameters, and determine its relative priority. The evaluation of risks is needed to assign relative importance to each identified risk, and is used in determining when appropriate management attention is required. Often it is useful to aggregate risks based on their interrelationships, and develop options at an aggregate level. When an aggregate risk is formed by a roll up of lower level risks, care must be taken to ensure that important lower level risks are not ignored.

A typical work product would be a list of risks, with a priority assigned to each risk.

  1. Demonstrate that you have a process to develop a risk mitigation plan for the most important risks to the project, as defined by the risk management strategy. A critical component of a risk mitigation plan is to develop alternative courses of action, workarounds, and fallback positions, with a recommended course of action for each critical risk. The risk mitigation plan for a given risk includes techniques and methods used to avoid, reduce, and control the probability of occurrence of the risk, the extent of damage incurred should the risk occur (sometimes called a “contingency plan”), or both. Risks are monitored and when they exceed the established thresholds, the risk mitigation plans are deployed to return the impacted effort to an acceptable risk level. If the risk cannot be mitigated, a contingency plan may be invoked. Both risk mitigation and contingency plans are often generated only for selected risks where the consequences of the risks are determined to be high or unacceptable; other risks may be accepted and simply monitored.

Options for handling risks typically include alternatives such as: (1) Risk avoidance: Changing or lowering requirements while still meeting the user’s needs; (2) Risk control: Taking active steps to minimize risks; (3) Risk transfer: Reallocating design requirements to lower the risks; (4) Risk monitoring: Watching and periodically reevaluating the risk for changes to the assigned risk parameters; (5) Risk acceptance: Acknowledgment of risk but not taking any action. Often, especially for high risks, more than one approach to handling a risk should be generated.

In many cases, risks will be accepted or watched. Risk acceptance is usually done when the risk is judged too low for formal mitigation, or when there appears to be no viable way to reduce the risk. If a risk is accepted, the rationale for this decision should be documented. Risks are watched when there is an objectively defined, verifiable, and documented threshold of performance, time, or risk exposure (the combination of likelihood and consequence) that will trigger risk mitigation planning or invoke a contingency plan if it is needed.

Adequate consideration should be given early to technology demonstrations, models, simulations, and prototypes as part of risk mitigation planning.

Typical work products would include: (1) Documented handling options for each identified risk; (2) Risk mitigation plans; (3) Contingency plans; and (4) a list of those responsible for tracking and addressing each risk

  1. Demonstrate that you have a process to monitor the status of each risk periodically and implement the risk mitigation plan as appropriate. To control and manage risks effectively during the work effort, follow a program to monitor risks and their status and the results of risk-handling actions regularly. The risk management strategy defines the intervals at which the risk status should be revisited. This activity may result in the discovery of new risks or new risk-handling options that may require re-planning and reassessment. In either event, the acceptability thresholds associated with the risk should be compared against the status to determine the need for implementing a risk mitigation plan.

Typical work products would include: (1) Updated lists of risk status; (2) Updated assessments of risk likelihood, consequence, and thresholds; (3) Updated lists of risk-handling options; (4) Updated list of actions taken to handle risks; and (5) Risk mitigation plans.

  1. Demonstrate that you have established and maintain an organizational policy for planning and performing the risk management processes. 
  1. Demonstrate that you establish and maintain a plan for performing the risk management process. Typically, this plan for performing the risk management process is included in (or referenced by) the project plan. This would address the comprehensive planning for all of the specific practices in the project plan, from determining risk sources and categories all the way through to the implementation of risk mitigation plans.
  1. Demonstrate that you provide adequate resources for performing the risk management process, developing the work products, and providing the services of the process. Examples of resources provided are: risk management databases, risk mitigation tools, prototyping tools, and modeling and simulation.
  1. Demonstrate that you assign responsibility and authority for performing the process, developing the work products, and providing the services of the risk management process.
  1. Demonstrate that you train the people performing or supporting the risk management process as needed.
  1. Demonstrate that you place designated work products of the risk management process under appropriate levels of configuration management. 
  1. Demonstrate that you identify and involve the relevant stakeholders of the risk management process as planned.
  1. Demonstrate that you monitor and control the risk management process against the plan for performing the process and take appropriate corrective action.
  1. Demonstrate that you objectively evaluate adherence of the risk management process against its process description, standards, and procedures, and address noncompliance.
  1. Demonstrate that you review the activities, status, and results of the risk management process with higher level management and resolve issues. Reviews of the project risk status are held on a periodic and event-driven basis with appropriate levels of management, to provide visibility into the potential for project risk exposure and appropriate corrective action. Typically, these reviews will include a summary of the most critical risks, key risk parameters (such as likelihood and consequence of these risks), and the status of risk mitigation efforts.

 The Integration of Six Sigma with Business Analysis

Incorporating Six Sigma methodologies in two different sub disciplines (Enterprise Analysis and Solutions Assessment and Validation) within Business Analysis in order to improve and offer more tools to practicing BA’s in their everyday projects.

What is Six Sigma anyway? We keep hearing about it all the time. Plainly put, Six Sigma is a business management strategy, initially implemented by Motorola, that today enjoys widespread application in many sectors of industry.

The real definition of Six Sigma is that it seeks to improve the quality of process outputs by identifying and removing the causes of defects (errors) and variation in manufacturing and business processes. It uses a set of quality management methods, including statistical methods, and creates a special infrastructure of people within the organization (“Black Belts”,”Green Belts”, etc.) who are experts in these methods. Each Six Sigma project carried out within an organization follows a defined sequence of steps and has quantified financial targets (cost reduction or profit increase). In Six Sigma, a defect is defined as anything that could lead to customer dissatisfaction.

With the definition given above, there are two particular sub-disciplines that are part of Business Analysis in which Six Sigma techniques can prove particularly invaluable:

I. Enterprise analysis or company analysis- This aspect focuses on understanding the needs of the business as a whole, its strategic direction, and identifying initiatives that will allow a business to meet those strategic goals.

II. Solution assessment and validation –This part describes how the Business Analyst can verify the correctness of a proposed solution, how to support the implementation of a solution, and how to assess possible shortcomings in the implementation.

This article will speak to these specific areas and explain how adopting Six Sigma in these specific areas can help Business Analysis as a whole.

Firstly, let’s begin with Enterprise Analysis. As the BA or team of BA ‘s are deployed for an Enterprise Analysis project, Process Mapping and Business Process Management (BPM) is a part of Six Sigma that can be instituted and relatively easily. Put plainly and concisely, Six Sigma is about helping an organization make more money by improving customer value and efficiency. (Pyzdek, p.5) . Above all, customers come first in a Six Sigma model, followed by everything else and that makes sense because at the most fundamental level, it is the customer driving the business revenue, nothing else. Whether someone clicks on a web link, phones or emails a company or transacts in any way, it is the customer doing all of this so rightfully speaking the customer pays and the old adage holds true that “the customer comes first”. With this line of thinking, everything else becomes tangential and peripheral to that of the customer and so to make more money, it follows that a business needs to get as much business as possible from existing and new customers and to keep them coming back. You now might ask, “that great but where does Business Analysis fit into this picture”?

At its very core, Business Analysts are involved in most projects where efficiency is to be improved (sometimes even acting as change agents) and that usually tends to translate to improving customer value, which in turn brings more revenue to an organization. It is a cycle. Using this definition throughout this paper, it is fundamental to include Six Sigma practices in wherever value to the organization is sought (usually by means of increased efficiency, whether it be a new process, a software tool or some other way of creating value for the organization). This is critical to company “bottom lines” because those companies that are do not practice Six Sigma generally tend to spend anywhere between 25% to 40% of their revenues fixing problems. This is why the process of Enterprise Analysis is so important. Bad or incomplete Enterprise Analysis can kill projects and put entire companies out of business the same way as if they weren’t practicing Six Sigma principles. If there is no awareness of defects and “leaks” and they stay unknown to a company, these inefficiencies can eventually kill a company by causing them to hemorrhage money until they go bankrupt. In this economy especially, it can be catastrophic.

Let’s consider a high level case study of two particularly well publicized examples one of which was General Motors (GM). Toyota was the other company, however, Toyota never actually went bankrupt but could have and averted it quite narrowly. For GM, although it was a short bankruptcy and they recently emerged, GM was doomed to fail and go into bankruptcy eventually sooner or later. It was an example of a truly “bloated” company that had little organization to many of its processes and clung to many old ideas. The customer was an “afterthought”. In fact the culture there was still very much the “old line” way of thinking that it forced them to go bankrupt. It was inevitable that change needed to happen.

If GM had a different mentality and approach and a keen awareness of their competitors, bankruptcy wouldn’t have ever been even a thought. Let’s also not forget that this was also the same company that in previous years held the title of being the largest company in the world (#1 ranking) for many years based on numerous financial factors. One of the most fundamental problems it had (that plague most companies) was one of efficiency and what value customers gave to the brand name, GM in general. GM literally ignored the competition by Toyota and Honda both of which consistently came out with improvements each year to their cars, models, efficiencies of their business processes and products (the cars themselves) despite being behind GM for many years. One of the other largest failures of GM was to ignore the growing sentiment of creating “greener, hybrid” cars that would use alternative means of fueling for transport and provide value for customers in that respect. This line of thinking never really caught on with the company culture and therefore created bad decisions on management’s part that caused it to enter bankruptcy and re-organize itself involuntarily. This was the best way for the competition to overtake GM.

The complex analyses that would have helped GM avoid bankruptcy would have needed to take a “Bottom Up” approach starting with the customers and then performing a complete review of the company to find out where all the “leaks” are and figure out a solution to plug those leaks permanently (or at least with a very durable, long lasting seal) and get the organization closer to Six Sigma and back into the “black” of profitability. What they are doing now is selling off some assets which is one of many changes that are needed there. This will help them become a different company by being “leaner and meaner”. It is a perfect case study because GM produces the product of cars, which are a very complex and expensive product to produce in the first place and require huge capital investments in equipment and resources. We can all imagine that with all the different models and manufacturing at different plants around the globe, the product is prone to a multitude of defects. Every car company has this challenge. The bottom line is that many more car companies are better at minimizing their defects and improving efficiencies than GM was able to. None are perfect but some companies do business in a given industry better than others and it shows that being biggest doesn’t mean always being the best. In this case, it was far from it.

The case of Toyota is somewhat different than GM. Toyota, which for years has embraced the notion of Kaizen (continuous improvement) and Six Sigma and was one of the world’s most admired companies, made a large error in judgment. The executives were so in need to be number one and overtake GM, that they had forgotten their customers’ needs (which is primarily to make cars of value and help save them money). They completely lost sight of that and Toyota started churning out larger and more expensive cars and trucks. Yet again we see here that customers’ needs were ignored. Six Sigma principles will not work if the basic tenet is ignored, which is the customer. A company that practices Six Sigma can never lose sight of that. So too, like GM, Toyota must face a changing world and change with it or perish.

We have seen a couple of case studies that bring the central tenet of Six Sigma home. How could these companies be improved through Six Sigma and how could Business Analysis help? A fundamental performance improvement model of Six Sigma is the process of DMAIC. The components are: Define, Measure, Analyze, Improve and Control and is used when a project’s goal can be accomplished by improving an existing product process or service. DMADV which is the other model and consists of Define, Measure, Analyze, Design and Verify is where the project goal is the development of new or radically redesigned product, process or service.The Design phase is akin to establishing a project charter, process map and benchmarking in much the same way as Business Analysts do in Enterprise Analysis. The Measure phase deals with the quantitative aspects (i.e. Data Mining, Systems Analysis, Pareto Analysis).Analyze is the true quantitative heart of Six Sigma and analysis in general and what would also comprise most of a Business Analyst’s work. In this phase, Process maps and charts, models, simulations, hypothesis testing, inferential statistics are used. Improve is using Project planning and management tools, prototyping and doing pilot studies and lastly, Control is to align with ISO standards, reporting, bid and cost estimating models and so forth. Many of these themes tie directly with business analysis in a myriad of ways.

In Analysis within Six Sigma Process mapping – the following processes are involved: Select Process, Define the process, Map the primary process, Map alternative paths, Map inspection points, use the map to improve the process. (for instance Service: Customer Inquiry to Resolution). This an example when a Business Analyst can help promote the process of change by performing business process analysis and finding out the problems and possible solutions that may be required to change entire business processes and/or the systems and how they work.

Resources that would be needed for such an undertaking:

  • Project Champion (Management – to provide funding and resources),
  • Team Leader (organize and conduct meetings – the BA),
  • Action Item Owner (assigned tasks) and
  • Team Member (assigned tasks) – The team should develop 2 maps, the As Is and the Should be (To Be). Should be (To Be) forms the basis of re-engineering.

In Enterprise Analysis, objectives need to be SMART= Specific, Measureable, Achievable, Relevant and Time Bounded. In the second part, Measurable, is where the analytics and quantitative analysis of Six Sigma can prove invaluable. In these instances, Benchmarking can prove most valuable in order to provide a first basis of quantitative analysis so there’s something tangible to measure from the start for example, Benchmarking customer service, if the service levels are an issue then these can be Benchmarked first using a variety of statistical means to get within 6 sigmas of the standard deviation (bell curve). Benchmarking is more than goal setting, it’s focus is on practices that produce superior performance and for Benchmarking efforts to succeed, there must be commitment, understand the “big” picture (goals to achieve) and focus on not only the metrics involved but the process.

Three other methods in addition to Benchmarking are most useful when incorporating Six Sigma efforts into Enterprise Analysis:

 Flow Charts of processes – Both “As Is” (Current Capabilities of Business Architecture) and “To Be” (What needs to be done to “get to the next level”
 Pareto Analysis – Pareto Analysis is a statistical technique in decision making that is used for the selection of a limited number of tasks that produce significant overall effect. The Pareto Principle (commonly also known as the 80/20 rule) is basically the idea that by doing 20% of the work you can generate 80% of the benefit of doing the whole job.
 Cause and Effect Diagrams – A Cause-and-Effect Diagram (also known as a “Fishbone Diagram”) is a graphical technique for grouping people’s ideas about the causes of a problem. It forces the team to consider the complexity of the problem and to take an objective look at all the contributing factors

By performing these kinds of analytical studies using Business Analysts and Six Sigma team members, the gaps will also be revealed more easily and accurately which then can be documented for improvement purposes as well and to define solution scope. Incorporating Six Sigma techniques also bring to light the defects and can make for a more convincing, “iron clad” business case backed by statistics and data.

Solution Assessment and Validation describes the tasks that are performed in order to ensure that solutions meet the business need (at an acceptable, given level of quality) and to facilitate their successful implementation. These activities may be performed to assess and vali-date business processes, organizational structures, outsourcing agreements, software applications, and any other component of the solution. (BABOK V2, p. 121). The Business Analyst is to make sure that the solution maximizes the value that was to be delivered to the stakeholders in the first place. The way Six Sigma can augment this through quantitative statistical analyses to ensure the (solution and related functionality, data, etc) are accurate, valid and provide the kind of value that is needed from the initial Vision and Goal statements outlined at the start of the project. For example, a company may now have business reasons for “mining” its data where it didn’t have such a purpose in the past and it needs to look for a solution (most likely an Enterprise Level Decision Support/BI System). One needs to make sure when this solution is implemented, that it is assessed and properly validated through various efforts described below. The goal is to make sure that it will achieve and add value to the organization, thereby helping it to better understand its customers, further driving revenue, and back to that cycle I mentioned earlier in this paper.

Techniques commonly used in Business Analysis that tie into Six Sigma:
 Acceptance and Evaluation Criteria
 Decision Analysis through the use of data and data modeling
 Reliability and Validity of Data through Enumerative and Analytic studies – using various statistical methods to test validity of data and solution that they fall within normal distribution patterns (i.e. the famous “bell curve”)
 Hypothesis Testing and various other Measurement Analysis Systems
 Process Mapping and Modeling
 Force Field Analysis – Sometimes there are not clear and simple reasons why an idea is useful or otherwise – the pros and cons are more uncertain and possibly distant forces.

‘Force’ is a metaphor that everyone viscerally understands. Length of arrow is already used in mathematics for vectors that indicate the size of a force. Use it to understand the forces for and against an idea.

Defect Assessment – Analysis and Assessment of all defects uncovered within a project, prioritizing them in a matrix format and deciding which defects to fix versus which ones to leave (costs of fixing vs. what added value will result to fix a particular defect). One must focus on those defects to fix that bring the most value and so on. Also, gaps and related shortcomings that a system should address but does not could be considered a defect. Enterprise Analysis can help uncover defects in the very beginning so that appropriate planning and solutions aimed at fixing the defects can be rectified during the other stages of analysis.

Finally, Root Cause Analysis (RCA) are methods aimed at identifying the root causes of problems or events. The practice is predicated on the belief that problems are best solved by attempting to correct or eliminate root causes versus merely addressing the immediately obvious symptoms. By directing corrective measures at root causes, it is hoped that the likelihood of problem recurrence will be minimized. RCA can be used throughout a project and in all the various phases that a Business Analyst would be involved in. Pareto Diagram, Fishbone diagram, Histograms, etc. are just some of the common tools used.

As we can see throughout this paper, Six Sigma is critical in achieving maximum results in costs, efficiency and most importantly customer service by Business Analysts in both Enterprise Analysis and within Solution Assessment and Validation efforts particularly. This doesn’t mean these principles do not apply in other sub-disciplines but they most importantly apply in these two specific areas. It is a quantitative, rather than a qualitative approach which also lends more credibility to these methodologies because once the research has been done, the numbers are what drives the business in the end. Overall, there is less variation using this type of quantitative methodology .

 Getting Started Six Sigma within an Organization

Is Six Sigma Right for you ?

The starting point in gearing up for a Six Sigma is to verify that you are ready to embrace a change that says “There is a better way to run your Organization”.

There are number of essential questions and facts you will have to consider in making a readiness assessment:

  • Is the strategic course clear for the company?
  • Is the business healthy enough to meet the expectations of analysts and investors?
  • Is there a strong theme or vision for the future of the organization that is well understood and consistently communicated?
  • If the organization good at responding effectively and efficiently to new circumstances?
  • Evaluating current overall business results.
  • Evaluating how effectively do we focus on and meet customers’ requirements?
  • Evaluating how effectively are we operating?
  • How effective are your current improvement and change management systems?
  • How well are your crosses functional processes managed?
  • What other change efforts or activities might conflict with or support Six Sigma initiative?
  • Six Sigma demands investments. If you cannot make a solid case for future or current return then it may be better to stay away.
  • If you already have in place a strong, effective, performance and process improvement offer then why do you need Six Sigma?

There could be many questions to be answered to have an extensive assessment before deciding if you should go for Six Sigma or not. This may need time and a thorough consultation with Six Sigma Experts to take a better decision.

The Cost of Six Sigma Implementation:

Some of the most important Six Sigma budget items can include the followings:

  • Direct Payroll for the individuals dedicated to the effort full time.
  • Indirect Payroll for the time devoted by executives, team members, process owners and others involved in activities like data gathering and measurement.
  • Training and Consultation fee to teach people Six Sigma Skills and getting advice on how to make effort successful.
  • Improvement Implementation Cost.

Six Sigma Start-up:

Now you have decided to go for Six Sigma. So what’s next?

Deploying a Six Sigma within an organization is a big step and involved many activities including define, measure, analyze, improve, and control phases. These phases are discussed in subsequent session. Here are some steps which are required for an organization at the time of starting Six Sigma implementation.

  • Plan your own route:There may be many paths to Six Sigma but the best is the one that works for your organization.
  • Define your objective:It’s important to decide what you want to achieve and priorities are important
  • Stick to what is feasible:Set up your plans so that they can match your influences, resources and scope.
  • Preparing Leaders:They are required to launch and guide the Six Sigma Effort.
  • Creating Six Sigma organization:This includes preparing Black Belts and other roles and assigning them their responsibilities.
  • Training the organization:Apart from having black belts it is required to have all employees Six Sigma skilled.
  • Piloting Six Sigma Efforts:Piloting can be applied to any aspect of Six Sigma including solutions derived from process improvement or design redesign projects.

Project Selection for Six Sigma:

One of the more difficult challenges in Six Sigma is the selection of the most appropriate problems to attack. There are generally two ways to generate projects:

  • Top-down:approach is generally tied to business strategy and is aligned with customer needs. The major weakness is they are too broad in scope to be completed in a timely manner (most six sigma projects are expected to be completed in 3-6 months).
  • Bottom-up:In this approach Black Belts choose the projects that are well-suited for the capabilities of teams. A major drawback of this approach is that projects may not be tied directly to strategic concerns of management thereby receiving little support and low recognition from the top.