Six Sigma Can Deliver Powerful Customer-valued Results - Despite Widespread Use as a Cost-cutting Tool

A few months ago, my wife and I had to rush our daughter to the emergency room of our local hospital. While patiently waiting for a doctor to see her, I noticed a poster taped to the wall that proudly advertised one of the hospital’s Six Sigma projects had successfully reduced the cost of emergency X-Rays. As I read the poster, I recalled watching a recent CNN news segment that reported adverse reactions to prescription drugs kill more than 100,000 Americans every year, making that the fourth leading killer in the U.S. after heart disease, cancer, and stroke. Listening to the CNN reporter I thought: safety = quality. Obviously, the medical industry has a quality problem. Listening to the reporter I also thought: patients = customers. What a crime, I concluded, that the potential power of Six Sigma was being wasted on simply reducing internal costs – such as the cost of X-Rays – instead of improving the quality of care provided to patients. But this situation is not unique to the medical industry. The underutilization, if not misuse, of Six Sigma is quite widespread.

Fundamentally, Six Sigma symbolizes a quantitative level of quality that is generally considered to be world-class. “Sigma” stands for the statistical standard deviation of a set of data, or the measure of the variability of the data, and “Six” represents the number of such standard deviations from the average, or mean, for a normal distribution of data. Think “bell curve”. The more standard deviations you move away from the average, the less chance there is of finding any data (like fewer ‘A+’ grades than the average ‘C’s in school). When applied to the topic of quality, this concept can be used to estimate the capability of a process and the probability of the existence of a defect in a product or service. The more standard deviations that fit within the specification limits for a process, the lower the probability of a defect and the higher the level of quality. Therefore, a Three Sigma (3 standard deviations) process reflects lower quality than a Six Sigma one, which is 99.99966% accurate and results in less than 3.4 defects per million opportunities of making a defect.

The derivation and significance of its name aside, the term Six Sigma has also become synonymous with a standardized methodology for problem solving. Known as the DMAIC process (Define, Measure, Analyze, Improve and Control), most companies consider it to be the definition of Six Sigma itself. Numerous businesses specialize in training new ‘Black Belts’ by the hundreds in the finer art of DMAIC with most of the Fortune 500 employing a large cadre of such specialists.

More significant than the ubiquitous DMAIC and Black Belts, most companies that have a Six Sigma program in place underutilize its potential by aiming it primary at reducing operational costs. When used in this internally-focused way, Six Sigma can be an effective tool with a significant ROI to be expected. On the other hand, when used in a manner that is externally focused, i.e., on the customer, Six Sigma becomes a powerful tool that can be the foundation of a systematic approach to improve customer satisfaction.

An ironic twist to a customer-focused versus internally-focused comparison is that the primary objective of the internally-focused approach (cost savings) is actually a significant by-product of the customer-focused approach. In other words, increasing customer-focused quality will also result in reducing internal costs. Recently, a friend of mine who used to be an executive in a Fortune 500 company reminded me of this point by saying, “It used to drive me crazy that the same things that our customers were complaining about were costing us a fortune. With the approach you describe, the cost savings come for free anyway. Fix the root-causes of those complaints and you get happier customers and lower cost”. Besides the obvious human impact, I wonder what the 100,000 deaths per year cost the health care industry.