Lean Six Sigma Transformation

A strategy for achieving and sustaining excellence

The current recession is prompting companies to rethink how

they use their resources to deliver value for their customers. When
deployed properly, Lean Six Sigma transformation proves to be
a powerful approach to delivering short-term process efficiencies
while also building longer lasting capability assets. It is a way
to generate and sustain true competitive advantage on and
beyond the factory floor.

Management is always challenged to
rethink which activities are core and
generate competitive advantage, and
which are non-core and should be
treated as commodities. The economic
crisis makes this level of questioning a
survival imperative. Optimizing strate-
gic activities, delivering on customer
and consumer expectations, and elimi-
nating waste, stand as the best ways to
remain successful now and to be stron-
ger when the good times return.
An analysis of winners in past
recessions confirms that companies
that mobilize their people to elimi-
nate waste—things customers will no
longer pay for—are better able to
resist the downturn and accumulate
monetary and non-monetary assets
that allow them to seize opportunities
and gain market share during the
recovery phase.
In post war Japan, for example,
Toyota recovered by reinventing the
way they designed and built cars.
1
The five stages of six sigma quality and assurance are define, measure, analyze, improve and control.
The success of the Toyota Production Lean Six Sigma
System (TPS) gave birth to a lean
manufacturing “religion,” adopted programs can
by an array of manufacturing and
service-oriented companies. During the deliver more than
1990s, Motorola and General Electric
reinvented Total Quality Management cost reductions and
and had a hand in redefining what is
now Six Sigma. Many companies in
increased value to
the United States and abroad have customers. They can
internal “black belt” teams to drive
continuous improvement projects, foster an enterprise-
eliminate variability and deliver what
the customer expects. wide transforma-
In our experience, combining Lean
and Six Sigma offers an advantage tion by changing
in performance, skills and sustainable
results. Lean provides the platform behaviors at
and the spirit and sets the core prin-
ciples — focus on value from the
all levels of the
customer’s viewpoint, eliminate waste
and pursue perfection. Six Sigma
organization.
defines a precise problem solving pro-
cess and puts hard data and measures
at the center of each process step:1 as-is
performance evaluation, root-cause behaving as standalone organizations, “continuous” and therefore “marginal”
discovery and evaluation. Six Sigma defining their project charters in a improvement. On the contrary, Lean
techniques are useful within the frame- closed loop and overanalyzing issues Six Sigma programs provide the tools
work of a Lean program. not business critical. These cases dam- to transform processes and assets to
When properly executed, both aged the reputations of Lean and Six deliver value to clients. Therefore, the
Lean and Six Sigma prompt the cul- Sigma concepts. CEO should send a clear signal that
tural and skill changes necessary to these projects are vital for the future
achieve the next stage of performance. Repairing Reputations and cannot fail.
Lean Six Sigma programs can deliver Define scope and tools. Selecting
Misconceptions about Lean more than an immediate cost reduc- the right Lean Six Sigma project
and Six Sigma tion and increased value to customers. requires breaking down strategic
Lean and Six Sigma became popular in They can foster an enterprise transfor- objectives into issues or along business
manufacturing in the 1990s and later mation by developing virtuous behav- units according to a main criteria: clos-
with service companies. Yet, many iors at all levels of the organization and ing a significant performance gap on
companies have not properly or fully strengthening the management chain, activities considered core. (For non-
embraced the concepts. Some firms particularly middle management. In our core activities, alternative approaches
adopt the “Lean” vocabulary but not experience, companies with successful such as outsourcing or straight cost
the methodological grounds, skills or Lean Six Sigma programs follow a few reduction methods can be applied.)
effort. Others confuse Lean with blind simple rules: Succeed on a pilot before a full
cost cutting, delivering short-term, Position the program at the execu- roll-out. The transformative nature of
bottom-line results but dangerously tive level. Lean Six Sigma programs a Lean Six Sigma project will affect
slashing core assets due to limited must address the CEO agenda. Often, many other dimensions—including
attention to value and the customer. Lean or Six Sigma projects focus on service level assumptions and objectives,
A few companies established Six Sigma solving marginal topics and setting less processes, organization and structure,
black belt teams that drifted over time ambitious targets. This is generally due IT tools, measurement systems for
from the original goal and began to a misconception that Lean is about performance management—and ulti-
mately workers’ mindsets and behav-
iors. Such magnitude of change will
A Winning Strategy for TelCo have little chance of success if deployed
all at once to the entire organization.
This telecom operator, we’ll call TelCo, embarked on an aggressive convergence strategy, Starting with a pilot will reduce disrup-
providing its 30 million customers with a quadruple play—phone (fixed and mobile),
tion, be easier to manage, and serve as a
Internet and TV. Selling and providing services for the new offerings, however, caused
some headaches. The business was swamped with customer inquiries, from questions proof of concept for the whole activity.
about how to use the products and billing to technical support. To improve productivity Start from the “eyes of the cus-
and protect margins, TelCo needed to realign its processes and skills, and do it quickly. tomer.” Lean and Six Sigma define
The company launched Lean Six Sigma programs across all customer-facing value and “critical-to-quality” attri-
activities, from sales and customer care to network installation and maintenance. The butes as the starting points for elimi-
programs were run by the Head of Transformation, who reported directly to the CEO.
nating waste and stabilizing output.
A core team of Lean Six Sigma experts designed and ran transformation streams across
an organization of 40,000 employees. These are generally the service levels
TelCo ran three-month pilots for each activity with a target to improve produc- expected from an activity. This initial
tivity by a factor of 20 to 30 percent. Each pilot had 40 to 50 trained managers who step requires the Lean Six Sigma team
acted as change agents and disseminated their know-how to their colleagues. The program to interact with the “client” (generally
was fully deployed within 18 months, reducing operating expenses by a magnitude of
the internal marketing department) to
$140 million for each activity.
understand what the customer expects
from an activity, and jointly define key
FIGURE 1: Analysis of team performance performance can be achieved. This can Fishbone and Ishikawa, 5 Whys, and
be accomplished with a fact-based correlation analysis, will help ensure
Performance Low performers assessment, usually based on measures, the root-cause investigation is creative
Management potential
Quartile Process effectiveness potential observations, and quantified proof of and robust. Levers to address the root
#4
delays, non-value added reworks, and causes of waste or variability fall into
Quartile variability among teams and processes. the six categories shown in figure 2. A
#3
Tools such as value-stream mapping, systematic approach will ensure a long
Quartile
#2 activity-based costing and benchmark- lasting result.
Quartile ing (external or internal) are useful to Evaluate and capitalize on the exe-
#1 convince people that a significant gap cution. Once Kaizen teams have deter-
exists, and that it can be closed. mined corrective actions, the actions
For transactional activities, simple must be immediately tested on the
tools such as a team performance dis- pilot. The Kaizen members who came
25% 25% 25% 25% tribution analysis can help managers up with the change ideas should be in
Source:
A.T. Kearney Employees understand their team’s average perfor- charge of the implementation in their
mance, evaluate improvement ability areas of responsibility. Two categories
performance indicators (KPI) that will and whether the solution will come of KPIs are defined and tracked: Imple-
measure the value. from process work, management deci- mentation KPIs, measuring the execu-
Quantify from a fact-based assess- sion or HR activities (see figure 1). tion of the new idea (process change,
ment. Once the pilot is selected, and Train by doing. Armed with a fact- new tools), and Performance KPIs,
the service level policy and measure- based diagnosis of how much should be measuring the effect of the change.
ment tools are in place, the reconfigu- gained and where efforts should focus, Visually displaying both categories of
ration process can begin. Most people the project can now be broken down KPIs to the entire firm is crucial to cre-
recognize that activities can improve into work-streams focused on specific ating momentum.
marginally. Managers and employees areas and improvement levers. Each Conduct the viral transformation.
have been doing their jobs and numer- work-stream is executed by a ”Kaizen” The pilot phase ends with two distinct
ous improvement initiatives have likely team, with operational managers pro- deliverables: actions with proven results
been deployed already. Therefore, a viding insights while being coached by and a team of managers, or “champi-
successful transformation hinges on a Lean Six Sigma facilitator. ons,” who have gone through the pilot,
the Lean Six Sigma team’s ability to The problem solving process of are fully aware of the roadblocks to
demonstrate that a quantum leap in Six Sigma and associated tools such as change, and can train other managers
(see figure 3 on the following page). Suc-
FIGURE 2: A “lean diamond” has six levers cessful companies use their internal
communications resources to advertise
Translate “voice of the customer,” Modify and simplify processes the success of their programs and pro-
define value and revisit to to eliminate waste
understand constraints
mote their champions.
Service
level Processes
Where to Apply Lean Six Sigma
Measure individual performance Performance
Eliminate some activities and The Lean Enterprise Institute reports
and align individual reward evaluation LEAN Organization combine or restructure others
projects and rewards system and structure to better implement “Lean” that more than 60 percent of compa-
nies in the industrial goods sector have
Skills and Tools formally adopted lean methods and
competencies and IT
Improve training programs, hiring Automate tasks, aggregate and tools, compared to just 30 percent of
policies, individual development share information and initiate services companies. But the latter figure
plans and career goals alert mechanisms (usually
requires IT investment) is growing rapidly. In fact, the most
Source: A.T. Kearney
 Phase 2
FIGURE 3: Steps in a Lean Six Sigma program ing lean programs to reduce cycle time
and increase agility. Lean, and to some
Phase 2 – Pilot extent Six Sigma, define a war-on-waste
Phase 1 Step 1 Step 2 Step 1 Phase 3 way of thinking, a customer-focused
Select Reveal gaps Connect Evaluate Deploy
project and team impact program
philosophy, and a problem solving
Define Measure Analyze Improve Control
framework that applies to any function
Source: A.T. Kearney
or type of industry (see figure 4).

What to Expect
FIGURE 4: Where to apply Lean Six Sigma Companies that deploy Lean Six
Sigma often enjoy immediate results
Voice of customer/ and build new capabilities to fuel
Scarce Sources critical to quality Sources of
resource of waste elements variablity vs. CTQ* their competitive advantage. The
Manufacturing • Raw materials • Overproduction • Product • Processes impact of eliminating waste and
activities • Semifinished and • Defects specifications • Supply chain
finished goods • Inventory and • Intake variability defects can be surprisingly high, par-
• Machine time WIP* • Discipline
• Operator’s time • Movement ticularly in service and transactional
• Capital employed • Waiting
activities where flows are not visible
Transactional and • Personnel time • Zeale • Satisfaction • Processes
administrative • IT resource • Rework • Timely delivery • Agent skill set and performance indicators are vaguely
activities • Waiting • Once and done • Discipline
• WIP • Motivation defined. Executives report reducing
Management • Management • Bad prioritization • Stakeholders’ • Decision cycle time by 50 percent or more and
activities time • Hierarchy satisfaction processes
• Heavy decision (shareholder, • Time management costs by 30 percent, and say they are
process peers, employees) • Behavior
more agile and ready to meet evolving
* WIP = Work in progress; CTQ = critical to quality Source: A.T. Kearney customer needs. Perhaps most impor-
tant, Lean Six Sigma programs allow
publicized recent Lean success stories ples. Even areas such as R&D and companies to invest in their human
are from the U.S. healthcare industry product and software development, assets—what Japanese Lean sensei
and government agencies around the which tend to resist the industrializa- describe as “the gold mine hidden in
world that are deploying Lean princi- tion of their activities, are implement- every company.”

Authors
Hervé Collignon is a partner in the Paris office. He can be reached at herve.collignon@atkearney.com.
Xavier Mesnard is a partner in the Paris office. He can be reached at xavier.mesnard@atkearney.com.
Marc Raffo is a principal in the Paris office. He can be reached at marc.raffo@atkearney.com.

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