C USTOMER & C OMPETITIVE I NTELLIGENCE

1. CUSTOMER&COMPETITIVEINTELLIGENCE S S IX IGMA FOR SYSTEMSINNOVATION&DESIGN DEPARTMENT OFSTATISTICS REDGEMAN@UIDAHO.EDU OFFICE: +1-208-885-4410 Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho DR. RICK EDGEMAN, PROFESSOR& CHAIR– SIX SIGMA BLACK BELT

2. S S IX IGMA Introduction to Six Sigma DEPARTMENT OFSTATISTICS Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

3. S S IX IGMA a highly structured strategy for acquiring, assessing, and applying customer, competitor, and enterprise intelligence for the purposes of product, system or enterprise innovation and design. DEPARTMENT OFSTATISTICS Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

4. “Often, problems are knots with many strands, and looking at those strands can make a problem seem different.” Mr. Rogers Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

5. is … a highly structured strategy for acquiring, assessing, and applying customer, competitor, and enterprise intelligence for the purposes of product, system or enterprise innovation and design.Innovation AlgorithmDMAIC (Define-Measure-Analyze-Improve-Control)Design for Six Sigma AlgorithmDMADV (Define-Measure-Analyze-Design-Verify)Makes Integrative Use Of:Various strategies and tools from Statistics, Quality, Business, Engineering and … ??? Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

6. GE … All 300,000+ GE employees must be Six Sigma certified. All new GE products developed using the “Design for Six Sigma” (DFSS) approach. 3M … New CEO (from GE) requires all 3M employees to become Six Sigma certified. Dupont AlliedSignal Sun Microsystems Raytheon Motorola Boeing Lockheed-Martin Bank-of-America American Express HSBC SAS Institute Rapidly Increasing Areas of Application. Healthcare – GE Heathcare - SLC Financial, Military – NSWC, Pentagon, etc. Fueled by: Strategic Contexts. Notorious bottom-line orientation & results. Adaptable to multiple bottom lines. Process orientation: rigorous and systematic approaches to innovation and design. Focus on the customer. Successful track record elsewhere. “Industry Buzz”. Six Sigma Organizations While Six Sigma is new at, for example, 3M – its benefits at others of these organizations is measured in the multi-billions of US dollars. Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

7. Quality is a state in which value entitlement is realized for the customer and provider in every aspect of the business relationship. Business Quality is highest when the costs are at the absolute lowest for both the producer & consumer. Six Sigma provides maximum value to companies in the forms of increased profits and maximum value to consumers with high-quality products and services at the lowest possible cost. Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

8. Why is Six Sigma Important? Cost of Poorly Performing Processes s level DPMO CP3 2308,537 Not Applicable 366,807 25%-40% of sales 46,210 15%-25% of sales 5233 5%-15% of sales 63.4 < 1% of sales Each sigma shift provides a 10% net income improvement The Villain Sigma (s) is a measure of “perfection” relating to process performance capability … the “bigger the better.” A process operating at a “Six Sigma” level produces only 3.4 defects per million opportunities (DPMO) for a defect. Without dedication of significant and appropriate attention to a process, most processes in leading companies operate at a level between 3 and 4 sigma. Cost of Poorly Performing Processes (CP3) Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

9. Cost of Poorly Performing Processes • The cost to deliver a quality product can account for as much as 40% of the sales price. • For example, a laser jet printer purchased for $1,000 may have cost the manufacturer $400 in rework just to make sure that you took home an average-quality product. • For a company whose annual revenues are $100 million and whose operating income is $10 million, the cost of quality is roughly 25% of the operating revenue, or $25 million. • If this same company could reduce its cost of achieving quality by 20%, it would increase its operating revenue by $5 million – or 50% of the current operating income. Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

10. What Does Six Sigma Tell Us? … and the Hero • We don’t know what we don’t know. • We can’t do what we don’t know. • We won’t know until we measure. • We don’t measure what we don’t value. • We don’t value what we don’t measure. • Typical Results: companies that properly implement Six Sigma have seen profit margins grow 20% year after year for each sigma shift (up to about 4.8s to 5.0s. Since most companies start at about 3s, virtually each employee trained in Six Sigma will return on average $230,000 per project to the bottom line until the company reaches 4.7s. After that, the cost savings are not as dramatic. • However, improved profit margins allow companies to create products & services with added features and functions that result in greater market share. Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

11. Six Sigma Affects Six Areas Fundamental to Improving a Company’s Value: • Process Improvement • Product & Service Improvement • Investor Relations • Design Methodology • Supplier Improvement • Training & Recruitment Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

12. Six Sigma vs. TQM Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

13. Values of Six Sigma Organizations IssueClassical FocusSix Sigma Focus AnalyticalPerspectivepoint estimatevariability Managementcost & timequality& time Manufacturabilitytrial & errorrobustdesign VariableSearchone-factor-at-a-timedesign of experiments ProcessAdjustmenttweakingprocess control charts Problemsfixingprevention Problem solvingexpert basedsystem based Analysisexperiencedata Focusproductprocess Behaviorreactiveproactive Supplierscostrelative capability Reasoningexperiencebasedstatistically based Outlookshort-termlong-term Decision Makingintuitionprobability Approachsymptomaticproblematic Designperformanceproducibility Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

14. Values of Six Sigma Organizations IssueClassical FocusSix Sigma Focus Aimcompanycustomer Organizationauthoritylearning Trainingluxurynecessity Chain-of-command hierarchyempoweredteams Directionseat-of-the-pantsbenchmarking/ metrics Goal setting realistic perceptionreach out & stretch Peoplecostasset Controlcentralizedlocalized Improvementautomationoptimization Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

15. The SIPOC Model Process Steps Inputs Outputs Suppliers Customers Inform Loop Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

16. Six Sigma COPIS Model Process Steps Outputs Inputs Suppliers Customers How does Six Sigma Work? The Voice of the Customer (VOC) is aggressively sought and rigorously evaluated and used to determine needed outputs and hence the optimal process configuration needed to yield those outputs and their necessary inputs for which the best suppliers are identified and allied with. From Concept to Market: the Voice of the Customer Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

17. Voice of the Customer Analyze Improve Measure Define Control Institutionalization TheDMAICModel Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

18. KanoCustomer Need Model Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

19. Kano Customer Need Model Delighted Degree of Execution TIME Fully Implemented Absent Disgusted Stakeholder Satisfaction Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

20. DimensionsofQuality- Garvin’sEight • Quality is usually a bundle of characteristics • We need to disaggregate this composite notion • This decomposition will help us to • make our notion of quality more precise • make comparisons possible • facilitate measurement • Only the customer determines the relative importance of these dimensions Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

21. Performance Features Conformance Aesthetics Reliability Durability Serviceability Perceived Quality Garvin’s Eight Dimensions Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

22. What the Terms Mean (1) • PERFORMANCE • Primary operating characteristics of a product • FEATURES • bells & whistles • secondary characteristics that supplement the basic functioning • CONFORMANCE • degree to which product meets pre-established standards (meeting specs) Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

23. What the Terms Mean (2) • RELIABILITY • Probability of product remaining functional over a specified period of time • DURABILITY • amount of use one gets out of a product before it physically deteriorates • SERVICEABILITY • speed and ease of repairs (or resolution of problems) Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

24. What the Terms Mean (3) • ASTHETICS • look, feel, and sound of a product • reflects individual preferences • PERCEIVEDQUALITY • perceptions of quality based on other cues and indirect measures • reputation or affiliation often key Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

25. Competing on Quality • It is not often feasible to pursue all 8 dimensions • Trade-offs are necessary • Quality niches can be defined and defended • A firm can define what quality means for its product • Must focus on the right quality measure: those one(s) that matter to the consumer Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

26. Dimensionsof Service Quality • RELIABILITY: consistency, error-free dependability • RESPONSIVENESS: willingness to help the customer • TANGIBLES: environment for the service presented • COMPETENCE: the right skills and knowledge required Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

27. Service Quality (cont.) • COURTESY: supplier’s behavior • SECURITY: freedom from danger or risk • ACCESS: ease of making contact • COMMUNICATION: understandable to the customer • EMPATHY: adopting the customer’s viewpoint Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

28. Aggregation • Often need to reduce the number of dimensions. Reduced list is: • Reliability • Responsiveness • Empathy • Tangibles • Assurance Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

29. Six Sigma Road Map: RDMAICSI Breakthrough StageStrategy PhaseObjective IdentificationRecognizeIdentify Key Business Define Issues Characterization Measure Understand Current Analyze Performance Levels Optimization Improve Achieve Breakthrough Control Improvement Institutionalization Standardize Transform How Day-to Integrate Day Business is Conducted Black Belt Projects Breakthrough Strategy Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

30. Define Six Sigma: How Do We Innovate? Definethe problem and customer requirements. Measuredefect rates and document the process in its current incarnation. Analyzeprocess data and determine the capability of the process. Improvethe process and remove defect causes. Controlprocess performance and ensure that defects do not recur. Control Measure Improve Analyze “Common sense” doesn’t mean “commonly done” or when done, done well. SixSigmaInnovation & theDMAICAlgorithm Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

31. Six Sigma from the GE Perspective Six Sigma is a highly disciplined process that helps a company focus on developing and delivering near-perfect products and services. Why “sigma”? The word is a statistical term that measures how far a given process deviates from perfection. The central idea behind Six Sigma is that if you can measure how many “defects” you have in a process, you can systematically determine how to eliminate those and approach “zero defects”. Six Sigma has changed the DNA at GE – it is the way that GE works – in Everything that GE does and in every product GE designs. “What is Six Sigma? The Roadmap to Customer Improvement” www.ge.com/sixsigma/makingcustomers.html Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

32. Design for Six Sigma Applications of Six Sigma that focus on the design or significant redesign of products and services and their enabling processes so that from the beginning customer needs and expectations are fulfilled are known asDesign for Six Sigma orDFSS. The focal aim of DFSS is to create designs that are resource efficient, capable of exceptionally high yields, and are robust to process variations. This aim leads to the DFSS algorithm Define-Measure-Analyze-Design-Verify (DMADV). Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

33. Define Six Sigma: How Do We Design? Definecustomer requirements and goals for the process, product or service. Measureand match performance to customer requirements. Analyzeand assess the design for the process, product or service. Designand implement the array of new processes required for the new process, product or service. Verifyresults and maintain performance. Measure Verify Design Analyze All new products at GE are designed using a DFSS algorithm. Designfor SixSigma (DFSS) Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

34. Design for Six Sigma at GE: DFSS is changing GE. With it GE can build on all of its capabilities and take all of its product and process designs to a new level of world-class performance and quality. The essence of DFSS is predicting design quality up front and driving quality measurement and predictability improvement during the early design phases- a much more effective and less expensive way to get to Six Sigma quality than trying to fix problems further down the road. What We Do. GE Corporate Research and Development Formerly posted at: www.crd.ge.com/whatwedo/sixsigma.html Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

35. Another View of Design for Six Sigma: • DFSS is the change in the product design organization from a deterministic to a • probabilistic culture. Our people were trained to incorporate statistical analysis of • failure modes, both in products and processes. They began to incorporate design • changes that modify & eliminate design features with a probability of failure within a • predefined range of operating environments and conditions. The design organization • changed from a “factor-of-safety” mentality to one in which there was a quantitative • assessment of design risk. Four elements of design are most critical to the effort: • Design for producibility (design for manufacturing and assembly); • Design for Reliability; • Design for Performance (technical requirements); and • Design for Maintainability. • “Design for Six Sigma: 15 Lessons Learned”, • Quality Progress, Vol. 35, No. 1, pp. 33-42, January 2002. Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

36. Improvement & Innovation– Focuses on high priority problems in business processes. This uses theDMAIC methodology:Define, Measure, Analyze, Improve, and Control. • Design–Design For Six Sigma (DFSS)addresses new or fundamentally poor processes. The methodology is called theDMADVorDMADOVmodel: Define, Measure, Analyze, Design,Optimize, and Verify. • Business Process Management–aids in definition and management of operations and activities in terms of core and enabling processes. The resulting process management systems provide a foundation of process definition and baseline data for all process design and improvement activities. Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

37. Six Sigma Strategy & Methods Appendix1: Corporate Leadership Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

38. Six Sigma Strategy & Methods Appendix 2: People of Six Sigma Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho

39. S S IX IGMA Endof Session DEPARTMENT OFSTATISTICS Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design Dr. Rick L. Edgeman, University of Idaho