Beyond Six Sigma: Profitable Growth Through Customer Value Creation

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1 Beyond Six Sigma: Profitable Growth Through Customer Value Creation Carl Johnson ASQ Senior Member Certified Six Sigma Black Belt May

2 Six Sigma is a powerful but underutilized business tool. 2

3 Quality Professionals need to understand Six Sigma s real potential. Biomedical Auditor Calibration Technician HACCP Auditor Manager of Quality/Organizational Excellence Quality Inspector Quality Auditor Quality Engineer Quality Improvement Associate Quality Process Analyst Quality Technician Reliability Engineer Six Sigma Black Belt Six Sigma Green Belt Software Quality Engineer 3

4 Six Sigma s current inside-out perspective is not aligned with global business s next big push. SUPPLY CHAIN SUPPLIER MANUFACTURER RETAILER USER 4

5 SS needs to adopt an outside-in perspective to help global business create value for customers. SUPPLY CHAIN SUPPLIER MANUFACTURER RETAILER USER VALUE CHAIN 5

6 Six Sigma can become the engine of profitable growth for global business. 6

7 Six Sigma focuses on improving quality and reducing costs. 7

8 From 1990 to 1999, Motorola enjoyed the fruits of its Six Sigma investment $10 billion in revenue % Reduction in Cost of Quality 1992 Cost savings of $4 billion due to Six Sigma ,000 employees $31 billion in revenue 8

9 What has happened to Motorola? Dec. 19, Another 9,400 job cuts were announced Tuesday by the Schaumburg tech giant, reducing the size of Motorola by one-third since the cuts started in August Since then, and including Tuesday's cuts, Motorola has released 48,400 workers. June 28, Motorola Inc. said Thursday it will cut another 7,000 jobs worldwide in an effort to reduce costs, bringing the number of employees laid off since late 2000 to more than 50,000. The company currently has a workforce of about 100,000, down from 150,000. The company said it expects to take charges of about $3.5 billion. October 10, Motorola is cutting 1,900 jobs at 29 U.S. and international locations in an effort to improve operating efficiency. This brings the workforce down to 68,000. 9

10 Ford Motor Company utilized Six Sigma to save $300 million in 2004 as announced in Sept "Consumer-driven 6-Sigma lets us separately identify each of the elements, as well as the interaction of the elements, to achieve a result that addresses the entire issue - that leads to better processes, better products and greater customer satisfaction." Mike Stock, Master Black Belt 10

11 Ford announced closure of 14 factories and elimination of 30,000 jobs in January Selling what you have rather than what customers want doesn t make sense. It used to be that you d build it and they d buy it. But that s wrong, that s antiquated. Now it will be that if they will buy it, we will build it. Bill Ford, Jr. January 24,

12 70% of CEO s say that top line growth is their company s number one priority CEO Survey: University of Chicago and Charter Consulting February

13 Business thought leaders are stressing profitable growth. 13

14 Profitable growth maximizes market capitalization. 14

15 Cisco attributes the run up in its share price to providing value. The issue is not price competitiveness it is about the value that you bring to the marketplace James Richardson May 11, 2006 New Value Proposition James Richardson Senior Vice President Commercial Business Cisco Systems, Inc. Purveyors of Business Process Enhancing Solutions not Purveyors of Technology 15

16 Phil Kotler says smart marketers today are creating customer value. "Today's smart marketers don't sell products; they sell benefit packages. They don't sell purchase value only; they sell use value." "Marketing is not the art of finding clever ways to dispose of what you make. It is the art of creating genuine customer value." 16

17 Six Sigma can be adapted and extended to identify, quantify, deliver, and capture value. Use DMADV as the your execution framework Take an outside-in approach; measure and analyze the entire value chain Define the products and processes that would create additional value for your customer (and the customer s customer?) Verify your hypotheses with the customer; and then redefine your design(you won t have it right!) Focus the organization on delivering that value via people, processes, technology. 17

18 Map the value chain rather than the supply chain to identify value creation opportunities. Procure Procure Pre-media Print Distribute Distribute Insert Insert Pre-media Print SUPPLIER MANUFACTURER RETAILER Plan Deliver Sale Plan Create Create Print Print Deliver Deliver Insert Insert Deliver Sale USER Purchase Purchase 18

19 Quantify the numbers along the value chain to understand where the profits are. Plan Deliver Insert Deliver Sell Plan Create Create Print Print Deliver Insert Deliver Sell Suppliers Creative Printer Printer Trans News Agency Purchase Purchase Retailer/ Advert Advertiser Customer Selling Price Printer Revenue = US$ 0.05 per insert Margin Profit Advertiser Profit = US$ 1.00 per insert Cost Etc. 19

20 Develop product and process designs and verify your hypotheses with the customer. 20

21 What is the best use of the experience and talent you've grown through your SS investments? 21

22 Six Sigma - The Engine of Profitable Growth 22

23 Contact Information Carl Johnson Chicago, IL USA