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PEX Network takes time out to outline the fundamentals of the Lean, Six Sigma and BPM disciplines. Consider this essential reading for beginners, and a handy recap for seasoned process professionals
Lean
What is the definition of Lean?
Lean is a production practice with the key tenet of preserving value with less work. Operations that fail to create value for the end customer are deemed "wasteful." Eliminating waste and superfluous processes reduces production time and costs.
The seven wastes listed by Japanese founders Toyota are transport, inventory, motion, waiting, overproduction, over-processing and defects. The tools for implementation include value stream mapping, kanban pull systems and poka-yoke (mistake proofing).
Lean’s mantra of "doing things better" leads many companies to view it from a cultural standpoint. Think of it like recycling – for it to work, it has to be more than an arbitrary process, and actually be engrained in society. For Lean to be successful, it has to permeate the business silos and receive universal backing amongst senior management and employees.
Why would you use it?
Lean’s strength is its fast implementation. Immediate benefits relate to productivity, error reduction, and customer lead times. Long-term benefits include improvements to financial performance, customer satisfaction, and staff morale.
The three principles of Lean leadership and thinking – challenge oneself to meet goals, kaizen (continuous improvement) and genchi genbutsu (going to the source - the "factory floor" – to make informed decisions) are well respected.
Process-orientated industries with clearly defined value chains – particularly those with manufacturing or supply-chain elements -are the most receptive to Lean methodology. These include automotive, industrial engineering and pharmaceutical industries.
Lean and Six Sigma are often used in conjunction with one another in value chain improvement. Six Sigma process mapping does not distinguish between information flow and product material flow, because they all come under the process umbrella. The Lean discipline of value stream mapping leads many exponents to miss how information processing by departments can hinder the order to delivery cycle. Combining techniques makes it easier to measure and execute on lead times.
Who created it?
Lean was based on the 1980s Toyota Production System, and covered all facets of the manufacturing business, from quality assurance to human resources.
The concept of Lean emerged over time, as Toyota engineers developed solutions to overcome problems that beset the company as it grew from humble beginnings into a global superpower. In this respect, Lean is an organic, flexible system.
What is the future of Lean?
Lean’s relatively simple methodology and ability to attack a very transparent evil – waste – make it an integral part of manufacturing and service industries. It is a far less abstract than BPM, for instance.
Lean’s future may rest on the translation of its methodology from the manufacturing floor to more unconventional settings. 5S standardized work stations may have a future in research and development labs, but not the everyday office.
According to Gartner’s "Hype Cycle" of new technologies, Lean and Six Sigma are past the peak of inflated expectations and the trough of disillusionment, and depending on the company, are climbing the slope of enlightenment or traversing the plateau of productivity.
Whether it is as a philosophy, a fixed state (being Lean), a methodology (performing Lean) or a cultural transformation (becoming Lean), it has a veritable future.
Six Sigma
What is the definition of Six Sigma?
Six Sigma is a set of tools and strategies to limit defects and variability in business processes, with the overarching goal of process improvement.
Its two project methodologies – DMAIC (define, measure, analyze, improve, control) and DMADV (define, measure, analyze, design, verify) are based on Deming’s Plan-Do-Check-Act cycle.
Six Sigma’s implementation rests on a dedicated improvement team divided into hierarchies based on a "belt" accreditation system. The team leverages advanced statistical techniques such as pareto charts and root cause analysis to reach quantified value targets.
Why would you use Six Sigma?
Six Sigma is a multifaceted methodology. To the statistical engineer in manufacturing, it might simply be a production quality metric, but to a customer service employee or CEO, it may embody the corporate culture.
Broadly speaking, it is a quality improvement methodology that provides a framework for a company to train its employees in key performance areas, shape strategy, align its services with customer needs, and to measure and improve the effectiveness of business processes. Fundamental to the latter is the identification of KPIs, and a focus on process quality variation.
Who created Six Sigma?
It was first outlined by Motorola in 1985 as a statistical modeling of manufacturing processes. A "sigma rating" relates to the percentage of defect-free products. A sigma rating of 4.5 (3.4 defects per 1 million) was initially touted as a realistic benchmark, with 6 sigma representing the holy grail.
Six Sigma was popularized by then CEO of General Electric Jack Welch in 1995, and by 1998 he claimed that it had led to $750 mn in cost savings. By the late 1990s, two thirds of Fortune 500 companies had incorporated Six Sigma projects, and by 2000, the discipline had spawned its own training and consultancy programs.
What is the future of Six Sigma?
Six Sigma’s traditional stomping ground – manufacturing – seems to be looking beyond quality control to foster an innovation culture. But for industries such as financial services, which demand a unique customer focus and struggle with a glut of data, Six Sigma represents the perfect partner.
Criticism of Six Sigma centers around its lack of originality beyond traditional quality improvement methods, implementation time (a minimum of 3 months), potential to stifle innovation, and the 1.5 sigma shift.
However, the proliferation of training courses, support organizations, and the fact that the average Six Sigma Black Belt commands a salary of $90,000 all point to its longevity. The skills to identify and quantify variation are strongly valued. As long as companies continue to see a positive ROI from Six Sigma projects, it will survive.
Business Process Management (BPM)
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What is the definition of BPM?
BPM is a management approach that looks at an enterprise holistically as a set of business processes.
Contrary to popular belief, the software associated with BPM is only a means to an end – a tool to understand, engineer and analyze processes. BPM leverages a five-step design model – design, model, execute, monitor and optimize. Six Sigma may be used to improve processes, before BPM looks to automate and manage them.
Why would you use it?
Most enterprises are divided into departments with idiosyncratic functions. The customer has a different perception of the enterprise, understanding it through the business processes through which he or she interacts. For example, a customer applying for a loan views the company as a loan provider, not as a group of departments such as sales, underwriting, legal and compliance, I.T. etc. Customers demand transparency and a seamless, cohesive experience. BPM looks at mitigating the effects of "siloization" by helping organizations manage complex, cross-departmental processes, and synchronizing them with customer demands. It’s the methodology to link improvement and process design efforts directly to the management system and organizational strategy.
Although it is somewhat of an abstract term, BPM initiatives – in one guise or another - have been adopted by financials services, telecoms, healthcare and military sectors.
Who created BPM?
Some experts trace BPM back to 1993, when consultants Michael Hammer and James Champy published a seminal book on business process reengineering.
This is disputed by champions of Smith and Fingar’s book: Business Process Management, The Third Wave, who denounce BPR for its shirking of execution. Execution is facilitated by the business process management suite. If the precise origins of BPM are somewhat hazy, it’s safe to say that the 2000 dot-com boom created a flourishing vendor market where integration focused platforms merged with pure-play BPM.
What is the future of BPM?
The exponential growth of BPM vendors (Appian was north of 50 million in revenue last year) points to a rosy future for an approach credited with helping companies emerge from the recession with their processes still intact.
BPM as a group of factory-style sequential workflows may be outdated, but BPM as a dynamic model that incorporates business and process intelligence, and tools such as predictive analytics, is very much alive. Going forward, mobile, social, predictive and cloud BPM appear to be the hottest trends.
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